Natural Resources Committee on May 9th, 2016

[The Chair, Liberal, James Maloney]

Good afternoon everybody. We're going to get started here. First of all, thank you for being here again. Today we are going back to school. We are joined by three distinguished academics. Stewart Elgie is from the faculty of law at the University of Ottawa. André Plourde is a professor and dean of public affairs at Carleton University, and Mr. Michal Moore, who is on camera from Calgary, is a professor at the school of public policy. We also have Mr. Doherty joining us today for a second time. He obviously liked it so much the first time he made a point of coming back, or he thinks he needs to go back to school.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

I didn't get invited back though.

[The Chair, Liberal, James Maloney]

It's an open invitation.

I will turn the floor over to Professor Elgie.

Perhaps you could start us off for 10 minutes or less.

[Prof. Stewart Elgie, Professor, Faculty of Law, University of Ottawa, Associate Director, Institute of the Environment, As an Individual]

Sure, I'll jump into the fray.

I have some slides here, which should pop up any second now. I think there is some version of these in English as well

As the chair noted, I'm a professor at the University of Ottawa. I head the university's interdisciplinary environment institute. I also chair the country's largest environmental economy think tank called Sustainable Prosperity. The perspective that I am going to speak to you today is on how we can advance both economic and environmental goals for the oil and gas industry at the same time.

I should say up front that I spent most of the 1990s suing the oil industry, as a founder of Canada's main environmental law NGO, before I became a professor. They apparently forgave me, because for the last year I've been the academic representative on the Canadian Association of Petroleum Producers advisory committee. I've had a chance to learn a lot about the industry from the inside, and in particular I have to say, I have developed a real respect for some of the CEOs in the industry who I think are making a genuine effort to try to address their environmental problems while building a competitive industry at the same time.

In fact, one of the things I just circulated is that we've recently launched a new initiative about repositioning Canada's economy as a whole to be a leader in clean growth globally. We had the fortune of having the Prime Minister there when we launched. It has 27 CEOs from all across the economy, including the resource sector, together with environmental groups, aboriginal leaders, social leaders, youth leaders. It's a collection that looks like Canada, and all agree that positioning ourselves where the world is going, which is toward clean growth and innovation, is a good idea for the country.

I'm going to talk specifically about oil and gas, but a lot of the framing and a lot of the policy prescriptions that you find in here are similar to the ones I'm going to talk about for oil and gas specifically.

Let's start with oil and gas generally. I don't need to tell folks here that we live in a carbon-constrained world, with Canada's commitments at Paris, the G7 commitments, about significant decarbonization over the next 50 years. What does that mean for an oil and gas industry, in a world in which we're going to have to dramatically reduce our green house gas emissions, particularly once you look beyond 2050? I don't pretend to be the world's leading technological expert on all the technologies and their trajectory, but there's a general consensus that we're going to use much less oil and gas, particularly as we move into the latter half of the century.

What does that mean for the industry that we're here to talk about today? These are the International Energy Agency's forecasts for energy consumption, which are generally considered middle of the road. This assumes that we put in significant new climate policies.

If you look at the two areas that are blue—the dark blue and the light blue—those are oil and gas. You see them spiking somewhere around 2040, levelling out, and then declining. The ones on the top, which are wind and solar, and the bottom, which are biomass and hydro, are growing. What's interesting is that there's still significant oil and gas, even by 2075. Under those projections, we'll be producing about the same amount as we were in the 1970s.

The point is that it's going to shrink, and cleaner energy is going to grow, but it's not an either/or choice. We're going to be living with both as part of our energy mix for a good 50 or 60 years to come. We can debate the pace and scale of the change, but as a general story, that's probably widely accepted.

This is just a drill-down—drill-down is probably the wrong word to use—into oil and gas specifically. It's of oil and gas through to 2040. Some of the things that are important to note, again, are that it begins to plateau around 2040 and that you see growth in natural gas. The bottom in dark green is the existing oil and gas fields, which shrink. The next two layers of green above it are yet to be found or developed oil and gas fields, which grow. More and more of the oil and gas that we'll be using in 2040 will be stuff that's not yet commercially produced. The dark bar in there, which looks kind of black to me, is their projections for oil sands. That is generally considered to be part of the energy mix that we're going to have.

As I said, this idea of choosing between one or the other is really a false choice.

Let me shift to what the future looks like, or what it might look like, for Canada's oil and gas industry in a carbon-constrained world in a couple of decades. I'll frame it by saying that when we think of competitiveness, traditionally we think of cost. That will continue to be an important factor, but environmental competitiveness will be an increasingly important factor. Some of the CEOs of the big oil companies would say exactly the same thing if they were here today. They're going to be competing both on cost and on environmental footprint grounds.

If you look at this chart put together by the Carnegie Endowment, you see that it's really interesting because it maps three things. The width of the bars shows the amount of oil and gas by 2020, predicted. On the far right of the chart are, of course, the oil sands. The gray bar shown is the cost of producing. What you see there is that the oil sands are among the highest-cost producers, although the low-end production is not the highest—but the high end is. The last bar, that black bar with an X in the middle, is the average greenhouse gas per barrel. That's the environmental cost. Again, it's near the top end of costs.

Therein really lies the challenge for Canada's oil and gas industry. We are a high-economic-cost and higher-environmental-footprint producer in a world in which oil and gas will get increasingly competitive as demand starts to level off. We're going to have to address both of those challenges.

I probably don't have to tell anyone in this room that a poor environmental reputation has costs. If you want to put a number on those costs, they're costing the oil and gas industry about $10 billion to $15 billion a year right now, because a big reason why their pipeline access is getting blocked is a poor environmental reputation. We can debate how much of that reputation is deserved and how much isn't—maybe we'll have another conversation on that—but deserved or not, it's costing them $10 billion to $15 billion a year in hard cash, which is way more than anyone will pay under any carbon-pricing scenario in the near future.

The cost of a poor environmental reputation is huge and it's real. What's the way out of it? What's the way forward?

I think, interestingly, that this is a solution that more and more leaders in the oil industry would agree with, and that is to drive clean innovation. That's really the win for them. They have to drive down their environmental footprint in a way that doesn't drive up costs.

We could have and should have a much longer conversation about how you drive clean innovation. Here, I have a wickedly complex chart. I've put it out just to say this is a vastly simplified explanation of how innovation happens. Basically, on one side of it people are coming up with brilliant ideas, and on the far side ideas actually become companies that generate jobs and growth and employ people. In the middle, things move up from scale-up to demonstration and to commercialization, with a bunch of investors working in the middle.

I want to make two points. One is that all innovation requires government support. There's virtually no major technology in the last century that hasn't had some major government investment at some stage of it, including every piece of the smart phone that we all have, and including the oil sands, which received tens of billions of dollars in initial support to unlock the technologies that made them viable. It really is a Canadian innovation success story.

The idea that all innovation is driven by the market is really increasingly seen to be false. Yes, the market is critical, but government has to play a key role because there are market failures. The big one is knowledge spillovers.

The problem with clean innovation is there are two market failures. Not only are there the general ones around innovation, but the thing you're innovating around doesn't have a market value. You can't go to the supermarket and buy low carbon. You can't buy clean air. These things are what are called “externalities” by economists, right? They're free, so the demand for clean innovation is actually driven by government policy, to a large extent. It's not like I produce cleaner air and I can walk out and sell a bunch of it the way I can sell a smart phone.

Government has an indispensable role to play in driving clean innovation, far more than in most types of innovation, and this is equally true when you talk about the oil and gas sector. That's probably the main point at a macro level, I guess, that I would hope to leave you with.

What does government do? Again, this is an attempt to say.... We probably should have a longer discussion about it, but on this next chart, these are just some bubbles. On the bottom are the different stages of innovation. Again, shown here on the chart on the far left is research, and on the far right is commercialization. You will see here a bunch of the main things that governments need to do to drive innovation effectively.

At the very top, what is shown is that like any corporation, you obviously need to have a strategy if you're going to make choices. You need to have a strategy for what a clean innovation future looks like, including for the oil and gas industry. Then, as you work down.... Obviously, I won't talk about research: we get that.

Some of the most important things are about putting a price on carbon. There's OECD study after OECD study saying that flexible, price-based regulations are by far the best way to drive innovation, because you make more money the more you reduce your footprint, so there's an incentive just to keep going and going. The people who reduce the most make the most money, unlike a speed-limit approach to regulation that says everyone just has to do the same thing.

So flexible, price-based approaches to regulation are going to drive innovation far more. Then, there are a whole bunch of other things, including things that you've probably heard a bunch about, which include supporting investment, particularly at the early stages when things move from the research lab through to demonstration and start-up and, to some extent, also at the commercialization stages.

The last thing I'll talk about is that bubble up there about connecting and lubricating the ecosystem, for lack of a better term. You actually have to have these inventors in their garages meeting the Suncors and the Shells of the world so they can actually get their brilliant ideas put into practice. It's like a dating service in a way; helping them find each other is something the market does a poor job of, and so government can play a critical role there.

The good news is we're making progress on this. Alberta is now the only major oil-producing jurisdiction in the world with a meaningful price on carbon and a cap on emissions. Those two things will both drive innovation.

I had the privilege or the onerous privilege of being part of the negotiations in the backrooms about that. It was a big thing for the industry to agree to this, and it was a big thing for the NGOs to agree to this, but it really will do what they're trying to do, which is to bend the cost curve of lowering carbon emissions.

Industry is ramping up its efforts to innovate. The creation of COSIA, Canada's Oil Sands Innovation Alliance, three years ago, is a genuine effort by industry to share all of its new clean innovations. There are private sector partnerships like Evok, a partnership between BC Cleantech and Alberta's oil sands, that are trying to make those connections between clean tech and oil and gas. That's a really good start, but they're not there yet and even they would admit that. They still have at least five to 10 years of hard, hard work to bend the cost curve. That's going to involve a bunch of the things in that previous diagram. A price of $30 a tonne is not enough to induce clean innovation. They have to get above $80, and they'll say that themselves when you have private conversations about their cost curve.

The real breakthrough technologies are going to get up into $80, $90 or even more than $100 a tonne. That's their cost curve for those innovations to make economic sense.

The investment side is going to ramp up. In the next five years, we're going to have to put a lot of money into some of these early-stage ideas and into trying out demonstrations, some of which will fail, as will any good technology venture capital. They're not all going to succeed, but the ones that succeed will be the ones that make a difference.

My last point is that the oil industry is now largely where the forestry industry was in the 1990s, as you may remember, with Clayoquot Sound and global protests. They were really in the bull's eye of the global environmental movement. They repositioned their entire business strategy to make sustainability an opportunity rather than a threat. Now the same people who used to boycott them promote their product.

The oil industry is in the beginning of trying to make that change. We'll know in five or 10 years whether they succeed, but I think a critical mass of the leaders are trying.

If we do it and if we put the right investments in place, it's not only going to help the oil industry. The technologies we develop will in and of themselves have value and will be an export product. They will create spin-off innovations around them that will also create value—in many ways this is Norway's solution—and the resources and the rent we get from them will actually help us invest in building Canada's next generation of economy, a cleaner economy.

Seeing it as a transitional solution to building a cleaner economy in the next half of this century is critical.

That's all I have. Thank you.

[The Chair, Liberal, James Maloney]

Perfect. Thank you very much.

I'm going to turn it over to Michal Moore in Calgary next.

[Prof. Michal Moore, Professor, School of Public Policy, University of Calgary, As an Individual]

It's nice to be testifying with André and Stewart.

In my remarks today, I'd like to reiterate some of the key forces we face in the oil and gas markets. I'd like to start by eliminating a source of confusion, at least one for me, about when people talk about oil and gas markets and then fail to distinguish that these are fundamentally different from electricity markets, the area I work the most in. When we hear commentary on news media, or often in policy debates, we hear discussion of the energy market. The energy market, small “e”, is one that encompasses a lot of different fuels, but it's not necessarily the oil market, and it's only partially the gas market when we talk about generation.

Per your instructions for my appearance today, I'm confining my remarks to oil and some gas markets, a couple of remarks on coal, but none on electricity. In that, I'm going to concede that I'm making a mistake, because all of these markets depend on electricity for pumps and control systems and, as a consequence, the issue of electricity does belong in the background of your deliberations.

The four key forces—which, I would point out, bring us to a discussion of whether we can become more competitive in oil and gas—in many ways have to do with the outside world. We have lots of world competition. Oil is abundant and is relatively easy to get at. It doesn't matter whether you're talking about Africa, South America, Mexico, or the Asia-Pacific markets, we have a lot of competition in that wide world. We have a lot of increased supplies coming from elsewhere in the world, Saudi Arabia being a principle case. When you're dealing with someone whose marginal costs of production, from fields they developed back in the mid-1950s, could be as low as $6 a barrel, you have someone who doesn't need to hesitate to lower prices or force capitulation in world markets. This affects us, of course, fairly dramatically.

There's a decrease in the demand from our principle client, the U.S. There are a lot of reasons for that, but in part they're developing their own supplies, and they're certainly fostering some innovation of their own on the demand side of the market.

As Professor Elgie pointed to in his remarks, we have new environmental standards that are imposing restrictions on us and on the way we acquire and process oil and other hydrocarbon products. Those standards are beginning to bite and constrain our ability to not only create new facilities in Canada but also to be able to sell to the U.S. and points beyond.

My recommendations and my sense of where we have to go are contained in how we are going to change our own responsiveness and our own structure for governance and incentives in the broader policy arena in Canada.

I'm going to suggest that we have to sponsor a couple of changes that will be fundamental to providing incentives for new innovation and new inventions, or new ways of doing business.

First, we need a better information system. We need something like the U.S. EIA in terms of our sources of information—and that's for all of our players, including the provinces or future investors. We need a way to get dispassionate, accurate, and dependable energy information out into the marketplace. We don't do that now. We have limited and, at least from the market's standpoint, biased information sources that don't always benefit every province or every area in an egalitarian way.

Second, I believe that we need an energy strategy, a real energy strategy, not just platitudes and policy prescriptions that are a reflection of current political conditions, but a strategy that says where we want to go as a nation in terms of our investments and in terms of our long-term policies, a strategy that brings the provinces together rather than continues to support 10 separate energy policies, 10 separate structures dealing with the outside world. If we're going to be able to sponsor that kind of energy strategy, we will find a better view of the future and a better view of how markets operate.

In that sense, I would like to suggest that we have a habit of chasing markets rather than planning for them. The energy markets that we face, we could address with hydrocarbon products, not necessarily just raw oil products, or natural gas, or natural gas liquids. In fact, markets will demand different products from us, and we're going to have to anticipate them and get out ahead of that.

I think that leads us, inevitably, to a world of greater investment. I'm going to touch on what Stewart Elgie just said, we need greater investment in trying to understand where technology is going and trying to understand how to produce better products that use energy in all its forms more efficiently over time.

Innovation, I believe, will be based on a fuller understanding of the basics of the technologies that we use and on finding out what to incent. The reference to developing new technologies, which I'm very, very familiar with from working at the U.S. national energy labs, is to know when to quit. You can chase a lot of technologies that have promise but won't make it through what's known as that S-curve, the valley of death that doesn't let them get commercialized over time.

I think we can focus our innovation most profitably on learning what the choices are of technology, how to use that most effectively, and how to focus on behavioural choices, which is the component that literacy is built on. We've done some work with Carleton University and discovered that there are great strides we can make in terms of bringing the public on to support technological change and embrace new solutions. Finally, make investment uncertainty decrease by having more consistent policy goals and more consistent opportunity, consistency between provinces and between investment opportunities.

Let me just list a couple of areas where I believe that innovation and technological change can benefit us in terms of using our oil and gas or hydrocarbon resources when they are finally no longer useful or attractive to the marketplace. By the way, I believe that the 2040 date that Professor Elgie suggested is probably very close to reality. The likelihood that there will be a transportation market beyond 2050 is pretty low. It will likely be replaced by electric demand more than combustible fuel demand.

We can use some of our hydrocarbon products, including natural gas, to bring onshore fertilizer businesses back to Canada. It's likely to be useful as we begin to get longer rotation times for agriculture and more penetration of agricultural development farther north. There are new chemical products that are an attractive industry that can use the residual from oil and use it very, very productively. There's an attractive export market for us. We can begin to think more seriously about exporting electricity that we don't have to move around in bulk. In other words, if you generate electricity in many forms, we can begin to export that instead of the fuel itself.

We've got new opportunities for plastics and synthetics—and frankly, long term, one of the most attractive uses for some of our pipeline system may be for moving water around and making use of that in new water markets.

At the core of of my arguments here today lies the idea of getting our policy arena more consistent, more coherent, and adopting strategies that bring the provinces together with a goal of trying to understand where the future energy markets in the wide world are going, as opposed to where they've been. I think when that is put out in front of the investment community more clearly, we're likely to be more attractive for capital investment here and, frankly, for a transition that's more attractive to outside investors.

My final point is that we are living adjacent to a country that has invested a tremendous amount of money in developing the 11 national energy labs just south of us. Right now every one of those labs is looking for research opportunities and collaboration for developing new technologies, and one of those is right in front of us today, a $240 million investment in revamping the transmission grid to make it more resilient and to bring it into the 21st century. These all represent opportunities for collaboration with people who do this for a living all the time. One of the most efficient uses of some of our own research talent will be collaborating with our colleagues in the U.S. and speeding up that S-curve that Professor Elgie just spoke of.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Professor.

I will turn the floor over to Dr. Plourde.

[Dr. André Plourde, Full Professor and Dean, Faculty of Public Affairs, Carleton University, As an Individual]

Thank you, Mr. Chair.

At the outset, please allow me to express my solidarity with the people of Fort McMurray in this time of crisis.

In the few minutes available to me, I would like to make four points. I am going to take, perhaps, a slightly more abstract approach to this and focus on the nature or characteristics of a policy framework that I think might be promising as we think of the future, and maybe highlight a few things we might have learned from the past.

First, from my perspective, the sustainability of Canada's conventional energy industries depends on our ability to reconcile their continued operations with Canada's climate policy objectives. Both of the previous speakers made the same type of point. That is going to be a critical determinant of how sustainable the operation of Canada's conventional energy industries is going to be over the next decades. If they can't adjust to the new realities, this will create issues for their survival.

The second point I would like to make is that within that context, the overall policy approaches adopted in the past were, effectively, anchored in the view that individuals, firms, and other collective actors should behave as if greenhouse gas emissions were costly to those generating the emissions, when in fact they were costless, or at best almost costless. There was this idea that by telling people these were nasty things or not necessarily desirable policy directions, but not giving any further signal, we would exhort them to say, “Well, it is as if this was an expensive thing to do”, when in fact it wasn't.

We can't be surprised, when were there no formal signals to be given, that this has not proven to be a particularly successful way of approaching policy. This has been true in Canada and in other industrialized nations as well. This notion that exhortation alone would be appropriate has been shown time and again not to be effective.

If change is to occur, then a clear economic signal, such as a price on carbon emissions, would need to be given as a matter of policy. Again, both previous speakers have made the point that government intervention in one form or another would be needed to give the right sort of environment for these types of issues to be addressed by the private actors. I would agree with that point.

The third point I would like to develop is that innovation activity, at least in part, will depend on sustained and successful research and development activity. There is a clear economic case to be made, as Prof. Elgie has done, for government support in this area. Such support could take all kinds of forms: subsidies for private sector activities and investments; government-sponsored research; or research activities undertaken directly by the government, either on its own or in partnership with other economic actors.

The issue here is going to be one of choice. There are all kinds of different activities, including investment opportunities in public sector R and D, that can be done to support energy industries down the road. There will never be enough public funds to pursue all of these activities. What kind of approach, then, would start to make some kind of sense?

I would argue that it is in Canada's self-interest that our first look be at trying to address issues and problems that other countries or actors outside of Canada will simply not address. A simple example is the oil sands. The characteristics of the oil sands deposits in Canada are very particular in the types of technologies that are used. They are particular, therefore, in the types of approaches to dealing with the environmental issues associated with the production of oil from Canada's oil sands. Since the deposits are almost unique internationally, nobody is going to try to fix these problems for us or address those environmental issues for us. That's the kind of place that should be particularly attractive for both the federal and provincial governments.

The next stage is to highlight what kind of international partnerships we can have to develop a broader set of collaborations than we normally think of. Professor Moore has made that point with national labs in the U.S. looking for collaboration opportunities. That's true across the world these days, and we should therefore try to find the right kinds of partnerships to help all of us address those issues. All of us will benefit from those types of things. Canada will not address nor solve all these problems by itself.

Finally, as the structure of economic incentives change in Canada and other countries, different economic opportunities will emerge. Firms in the sectors under consideration will react and decide which of these opportunities to pursue. In that context, it's best for government to allow industry to play that role, and not to be too directive in picking specific areas of winning technologies or aspects.

The key role for government has been highlighted before and the two points that I made earlier are to set a policy environment that provides clear signals across all sectors of the economy, that reduces uncertainty; provides clear incentives for the broad directions we want to work; and lets the people who have a lot of information and who will ultimately be making key investments in this area to choose the tracks they want to pursue. The role of the government or the state is to provide a much broader framework within which the industry would then take a leadership role in developing the next phases of the industry.

Thank you very much.

[The Chair, Liberal, James Maloney]

Thank you very much.

Now I'm going to open the floor to questions.

First up is Mr. Tan for seven minutes.

[Geng Tan, Liberal, Don Valley North, ON]

Thank you, professors, for your insightful presentations.

Professor Plourde, you mentioned that Canada needs a better policy framework. In your expert opinion, is a robust environmental assessment essential if Canada is to achieve a level of environmental protection that Canadians are looking for? Would you agree that Canada needs to have a stronger environmental oversight in the regulatory approval process?

[Dr. André Plourde]

That's certainly one part of the puzzle, but not the only part. As I would highlight and maybe others have highlighted before, we need something broader than command and control or directives to say do this. As Professor Elgie has mentioned, this is a flat line, whereas what you want is to provide growing incentives to do things.

It's important that the regulatory framework we use for projects encompasses an approach that truly recognizes both the benefits but also the cost, including the environmental cost of development of specific projects. From my perspective that would not be sufficient. We need something broader than that, that operates at a level where regulatory oversight is not necessarily a big factor in the activities.

[Geng Tan, Liberal, Don Valley North, ON]

Professor Moore, what should the government's policy be with regard to effective evaluation of all your activities if we want to help the industry remain competitive and sustainably green?

[Prof. Michal Moore]

I'm going to echo what Professor Plourde just said, that a role for government is to provide incentives. We do that in many industries today by finding technologies that can compete for support. I'm going to echo the idea that chasing or trying to pick a winner is not likely to be very productive in the long term. But when we provide some incentives that people can compete for to get a leg up and become more competitive in the market or to design new solutions that allow them to participate in the greater market more effectively, then we're likely to have more impact and a faster impact and an affirmation of some of the technologies that will eventually be the winners.

[Geng Tan, Liberal, Don Valley North, ON]

My next question is for Professor Elgie. You mentioned in your presentation that Canada's oil industry may have a poor environmental reputation, so you suggest that we provide more support for innovation to reduce the carbon footprint. It makes sense, but what are the innovations?

As mentioned by Dr. Moore, when we talk about innovations, we have to have a very basic understanding of them. How feasible is it to use those innovations that we have to meet our daily requirements for energy? What are the innovations?

[Prof. Stewart Elgie]

If I knew the answer to that, I'd be a much wealthier man than I am, and I wouldn't be a professor.

There are certainly some technologies on the horizon. I'm talking more about production than consumption, because they're obviously completely different technologies. The demand for this stuff is largely driven by transportation, and there's a whole basket of technologies there.

Let me focus on just the production side. The big challenge, really, for oil sands is that they have to generate a lot of energy for the steam and heat that separates the oil from the dirt. They have to find a technology that doesn't require them to use such massive amounts of energy and heat to do that separation. There are some that are in demonstration phases now. They're probably at least five to ten years away from being viable. There are two or three. I don't know which one will win yet. They don't even know which one will win yet.

I would echo what Professor Moore said. Government is probably not the right place to pick what the right technology is, nor is a professor, unless it's a professor of advanced engineering, which I'm not. What you should do is create the conditions that will accelerate getting to that answer and will motivate them to get to that answer faster than our competitors.

We are now competing for environmental performance in a way we never have before. We used to compete on labour costs and other costs. We're now competing on environmental performance. Just like we want to motivate labour productivity and innovation, we want to motivate environmental innovation and productivity. The ways to do that, believe it or not, are actually to have stringent standards but predictable ones.

Professor Moore hit on a really important point. If investors and companies know 10 to 15 years out where the bar is that they are going to have to hit, and it's predictable, the investments they make today will reflect the expectation of having to meet an increasingly stringent environmental standard. Creating an expectation of increasingly stringent, efficient regulation will do a lot of the driving of the right choices. I don't know the answer today, necessarily.

[Geng Tan, Liberal, Don Valley North, ON]

From what I heard, while the government issued its support for innovation, clean technologies, and new technologies, at least for now we still have to support our oil and gas industry.

[Prof. Stewart Elgie]

Oh, yes, but a lot of that clean technology will be in the oil and gas industry. I think this is part of the challenge. We're having this debate as if there's the new, green economy, and the old, brown economy. It's actually a false debate.

Innovation tends to happen around the things you already do in an economy. Innovation is usually not a white bolt of lightning that hits somewhere over there, where nobody's looking. You innovate around the things you're already good at and you already try hard at.

All of the expertise we've built up around oil and gas, as well as auto-making and other regional strengths in our economy, will be the places where we'll innovate. Where that innovation will take us is like guessing where the roots of a tree are going to go. We don't know, but the more we drive it, it will create value not just for the oil industry but for lots of other spinoff industries that emerge around some of those breakthrough technologies.

[The Chair, Liberal, James Maloney]

Ms. Bergen, over to you.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

Thank you to our three guests who are here today.

Dr. Moore, I'm going to start with you. I just want to start by saying that I'm hearing two different statements. On the one hand, I'm hearing that Canada has such a terrible reputation for not being environmentally responsible. Then on the other hand, I'm hearing that we have some of the greenest and the best technologies for extracting oil.

Correct me if I'm wrong, but it seems as if we as leaders are doing a disservice not just to our energy sector, but specifically to our oil and gas sector when we keep repeating this falsehood that somehow we are dirty oil extractors, and that we're not extracting our natural resources in, comparatively speaking, a responsible way.

I want to ask you, Dr. Moore, whether you have an opinion on that, and whether you think that as leaders—political leaders, academic leaders, NGOs, or whatever—we have a responsibility to speak the truth about Canada's responsible environmental record.

[Prof. Michal Moore]

Canada has certainly made significant strides in trying to understand how to extract, refine, and use hydrocarbon products more responsibly and more effectively over the years. Professor Plourde highlighted that in his remarks, and I will amplify the fact that we have made great strides in trying to understand what those are and trying to put a price on them. Most economists like me tend to favour a carbon tax to reflect some of the impacts or the potential externalities of using some of these fuels. We've got a start, we've got a framework, and it did start here. As a matter of fact, it started in a solid enough way that I think we can hold it up and say, this is a place where you can depart from and start to fine-tune some of those charges and make them more focused on consumer behaviour.

In terms of what we have developed, I think we have an opportunity to make a few more strides by using a hydrocarbon base—it doesn't matter whether it comes from Oklahoma, from Indonesia, or from here—in such a way that when we burn it at the end of the cycle, we generate air emissions and toxic compounds that have to be dealt with in some way.

There are a lot of other industries that generate toxic compounds that we can be a part of solving. Let me name only one, and that is the source of CO2 and methane gases that come from the construction of cement foundations, or cement bridges, or roadways. Basically, the amount of CO2 generated from transforming Portland cement as a rock into a useful compound simply dwarfs what we generate in oil sands operations.

On the other end, if you look at what has happened and the tragedy that we have in the northern Alberta region today, what's coming out of the burned forests and the transformation of cement products—which will have to be destroyed because they don't have integrity any more—will in turn exacerbate the problem that we have.

What I'd like to suggest is that we're sitting on top of an innovation opportunity here that we don't yet know how to use. But these hydrocarbon products can be the basis of a new way to generate or develop structural products that we can use in building. We can provide a substitute that's lower in carbon intensity than cement ever has been in the past. We can begin to go back to an old way of paving roads. I'm simply saying that there are ways to use our processes more effectively.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

I have three minutes left and I do want to ask another question and see if I can get Dr. Plourde into this discussion as well.

Dr. Moore, you talked about a a real national strategy on energy. I'm interested in a North American strategy and your comments on that. I think one of you maybe—and I missed part of Dr. Elgie's presentation—said that our greatest customer is now our biggest competitor, and that's the U.S. I know that we can't can't compare apples to apples in an exact way, but even in terms of our regulatory process, are we not doing ourselves a disservice and making ourselves uncompetitive when we're imposing provincial and national carbon taxes when the U.S. and Mexico aren't, and when we are adding extra layers and uncertainty, for example, to pipeline approval processes and banning tanker traffic off the coast of B.C., when the U.S. is doing the exact opposite? Can you comment on how we are putting ourselves at a competitive disadvantage?

[Prof. Michal Moore]

We put ourselves at a competitive disadvantage by not collaborating with our neighbours.

I thank you for the entry into that, because in seven days I'll be in Cuernavaca, Mexico, to outline a framework for a pan-North American energy strategy meeting that we hope to hold in August with Canadian participants, American participants, and Mexican participants. We hope to be able to offer some documentation on exactly what you're talking about in your deliberations.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

Does Dr. Plourde have any time?

[The Chair, Liberal, James Maloney]

One minute.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

You have one minute, Dr. Plourde. Do you have a comment to make?