Natural Resources Committee on April 26th, 2021

[The Chair, Liberal, James Maloney]

I call this meeting to order.

Welcome, everybody. We're grateful for your attendance at the first meeting of this new study. I'd like to welcome our four groups of witnesses, and I'll get to them in a moment.

This is meeting number two of the House of Commons Standing Committee on Natural Resources. I don't think I need to go into any detail on how the committee process works, because all of our witnesses have done this before many times, I'm sure. I'll just remind you that because it's a virtual meeting, wait until whoever you're speaking to or whoever is speaking to you finishes so that we can allow the translators to do their thing without any unnecessary challenges.

We're going to go to opening remarks for up to five minutes each. I don't think that's standard across every committee. I'm the policeman, which means I have to enforce the time limits on people and interrupt sometimes to stop them if we're going over time. I'll try to limit that as much as I can, but I will apologize in advance. Thank you.

We have four groups of witnesses today. We have the Department of Agriculture and Agri-Food, the Department of Natural Resources, the Department of the Environment and the National Research Council of Canada. Thank you all very much for taking the time to be here. We look forward to hearing your opening remarks and your answers to our questions.

I am going to proceed on the order that's set out on the agenda, which means that Steve Jurgutis, the director general of the strategic policy branch from the Department of Agriculture and Agri-Food will start us off.

Sir, the floor is yours.

[Steven Jurgutis, Director General, Strategic Policy Branch, Department of Agriculture and Agri-Food]

Thank you for inviting me here.

My name is Steve Jurgutis. I'm the DG, the policy planning and integration director, at Agriculture and Agri-Food Canada.

I'd like to talk to you a little bit about the critical role of the agriculture and agri-food sector in producing low-carbon fuels in Canada.

The Canadian agriculture and agri-food sector produces healthy food that supports a healthy environment and a healthy economy. The domestic production of low-carbon fuels represents an important opportunity for farmers and will help the agriculture sector contribute to Canada's climate change commitments. Low-carbon fuels derived from agricultural feedstocks are a commercially viable, made-in-Canada way to meet Canada's ambitious climate plan. The agricultural biofuels sector in Canada is a mature, stable market for Canadian farmers.

Clean fuel regulations built on current renewable fuel regulations will accelerate the production and use of low-carbon fuels, including agricultural-based clean fuels. The agriculture sector is well placed to help meet that demand and play an important role in the transition to clean fuels in Canada. Increased demand combined with expected increased investments in Canadian low-carbon fuel refining capacity will have an important positive impact on Canadian farmers by allowing them to diversify their markets, promoting value-added opportunities and encouraging rural renewal.

While traditional biofuel production derived from grains, oilseeds and animal by-products is expected to continue to play an important role in meeting clean fuel demand, agricultural wastes and by-products can also be transformed into low-carbon-intensity fuels. For example, there are over 60 anaerobic digestion facilities in operation today in Canada, transforming manure and food processing waste into biogas and renewable natural gas, which can be used on site to generate heat and electricity or be sold to natural gas or electricity grids.

The international export market for low-carbon fuels and feedstock also presents significant opportunities for the Canadian agriculture sector and for value-added products. In 2020, Canada's exports of canola seed to the EU were valued at $1.3 billion and primarily used in biodiesel production in France, Germany, Belgium and Portugal.

I will continue in French.

Low-carbon fuels are part of a broader overall effort the government and the agriculture sector are making to continue to improve the sector's sustainability. Canadian farmers are responsible stewards of the land and the government recognizes they are an important part of the climate change solution.

The agriculture sector in Canada is a world leader in innovating and adopting new technologies to improve environmental performance, reduce greenhouse gas emissions, and store carbon in agricultural soils. The government is investing in programs, science, and innovation to develop solutions that will help the sector grow sustainably and create better opportunities for farmers, businesses and Canadians. The Canadian agricultural partnership provides up to $414 million in cost-shared funding with the provinces and territories to help producers address soil and water conservation, reduce greenhouse gas emissions, and adapt to climate change.

As part of this partnership, Agriculture and Agri-Food Canada supports two clusters of research projects that work on low-carbon fuels and other bioproducts, for a total of $20 million. Canada's agriculture emissions represent 10% of Canada's greenhouse gas emissions and as a result of improved practices and efficiencies, agriculture emissions have remained relatively stable for two decades, even as production has increased.

For over 20 years, Canadian farmers, particularly in the Prairies, have increasingly adopted no-till and conservation tillage seeding techniques which has helped to transform agricultural soils in Canada being a significant carbon sink since 2000.

In closing, I would like to reiterate that the agriculture sector wants to continue to play an important role in meeting our climate change objectives. The clean fuels opportunity ahead of us will allow the sector to build on its solid foundation of biofuel feedstock production while creating economic growth and promoting renewal across the country.

Thank you for your time. I'm happy to take your questions.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Jurgutis.

As I should have mentioned at the outset—I apologize that I didn't—there was an agreement among the witnesses that three of the witnesses were going to reduce their opening remarks to four minutes and give the Department of Natural Resources an extra two minutes.

Mr. Jurgutis, I gave you a little bit of time beyond the four minutes. I don't know if it was just me, but there appeared to be some problems with the interpretation. It was coming through, but it was going in and out at times. Did anybody else have the same problem?

I see that we did, a little bit. Okay.

On that note, I will turn the floor over to Mollie Johnson.

[Mollie Johnson, Assistant Deputy Minister, Low Carbon Energy Sector, Department of Natural Resources]

Good morning, everybody. Thank you very much for the opportunity to speak today about the important role that low-carbon fuels will play in Canada's move to a net-zero future.

The Government of Canada is committed to reaching net-zero emissions by 2050. To get there, we know our economy will need to be powered by two key pathways: electricity and clean fuels.

Today, clean fuels are less than 5% of Canada’s total energy supply. Even with ambitious electrification, we know that 60% or more of our national energy demand will need to be met with low-carbon fuels to reach our net-zero goal.

Clean fuels represent the most effective way for hard-to-abate industries, such as cement, steel, heavy-duty transport and oil and gas, to lower their emissions and meet their goals. These sectors represent upwards of two-thirds, or 65%, of Canada’s emissions.

For this reason, December’s strengthened climate plan emphasizes new and enhanced measures to increase demand for clean fuels, including the pollution price and the clean fuel standard. It also includes the commitment to a $1.5-billion low-carbon fuels fund to enhance the production and use of clean fuels in Canada.

Before we look at the opportunities they present, let me take a moment to define what clean or low-carbon fuels mean. When we talk about them, we're talking about a range of fuels with significantly lower carbon content than conventional fuels. We're talking about hydrogen, advanced biofuels, renewable natural gas and synthetic fuels. They're made from a variety of sources found abundantly in Canada: agriculture, which we just heard a bit about; forest and municipal waste; clean electricity; and natural gas or petroleum when it's coupled with carbon capture and storage techniques.

The fact that modern biofuels are often produced from wastes presents environmental benefits. For example, the Canadian Forest Service, which is here with us today, estimates that if we were to use just half of the 65 million tonnes of wood residues that go to waste annually, we could heat more than four million homes in Canada and reduce our net emissions by 6.6 megatonnes each year.

Clean fuels are at various stages of market readiness. We have all been buying ethanol-blended gasoline at the pumps for years. However, other clean fuels have limited domestic production, and more research, development and deployment are required to drive down costs and open more end uses. This allows for a transitional approach. We can get emission reductions today from market-ready clean fuels, and even more reductions over the coming years as the next generation of fuels becomes more widely available.

The federal government has been playing an important role in establishing a clean fuel sector in Canada for decades. This support has helped build a number of world-leading companies, such as Ballard Power, Hydrogenics, Enerkem and Carbon Engineering. Through decades of research and programming, NRCan and the Government of Canada have helped get the clean fuels industry to where it is today. Our provincial and territorial partners, as well as indigenous businesses and communities, also see the benefits of advancing the clean fuels economy, knowing it will create jobs and opportunities in every region of our country.

Clean fuels offer a crucial low-carbon pathway for Canada’s conventional energy sector. For example, Canada’s vast natural gas and petroleum reserves, as well as our expertise in carbon abatement, can be levered to produce hydrogen, which can in turn be used as feedstock in oil and gas production processes, further reducing emissions in this sector.

The skill sets required in the fossil fuel industry and the low-carbon fuels industry are often directly transferable. By 2050, the hydrogen industry alone could employ over 350,000 Canadians, and many of these workers could come from oil and gas industries or build on their skill sets. Similarly, refinery facilities can be repurposed to produce clean fuels.

Clean fuels also represent a tremendous export opportunity for Canada. Take hydrogen as an example. The hydrogen strategy that was released in December aims to make Canada a supplier of choice for clean hydrogen, and the technologies to use it, in a global market that's expected to reach almost $12 trillion by 2050. If we seize the hydrogen opportunity domestically, by 2050 it could make up 30% of Canada’s energy mix, resulting in 190 megatonnes of emissions reduction and contributing more than $50 billion to the GDP.

Many other countries also see hydrogen as a major component of their energy and environment strategies and are making significant investments. Over the last 18 months, more than 20 countries have released their own hydrogen strategies and have committed more than $80 billion to this.

That's why we're working with governments around the world. Through initiatives like the Clean Energy Ministerial, where we co-chair the hydrogen initiative and the biofutures initiative, Canada's policy leadership and technology leadership are showcased on the world stage. These initiatives help us foster strategic partnerships that are essential to grow global demand for clean fuels, open new export opportunities and attract more foreign direct investment.

We know that Canada needs to continue to thrive as an energy nation in a global low-carbon economy, and to do so, we must seize the opportunity of clean fuels as a key pathway or risk being left behind.

I'm very grateful to be here today and to be joined by two experts from our ministry, who can also respond to your questions. Dr. Anne-Hélène Mathey is the director of economic analysis from the Canadian Forest Service, and Dr. Aaron Hoskin is a senior manager from the fuel diversification division.

I'll pause there. I look forward to answering your questions.

Thanks very much.

[The Chair, Liberal, James Maloney]

That's great. Thank you.

Next, from the Department of the Environment, we have John Moffet.

[John Moffet, Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment]

Good morning. My apologies for holding things up. Those who know me won't be surprised with respect to the technical challenges.

I am happy to be here along with colleagues from Environment and Climate Change Canada and from across the federal government. We are very pleased to discuss some of the government's policies that relate to the low-carbon and renewable fuels industry in Canada.

As you all know, in December 2020 the government released “A Healthy Environment and a Healthy Economy”. This plan is intended to drive reduced emissions across the Canadian economy, both in the near term and towards the target of net zero by 2050, in ways that stimulate economic transformation and development.

Investors, consumers and governments around the world are increasingly accounting for low-carbon considerations. The government's climate plan is intended to help ensure that Canadian workers and businesses are well positioned to respond to and benefit from that demand.

To accomplish those goals, the strengthened climate plan takes an integrated approach to climate and economic policy. This approach uses a mix of policies and programs to support the development of low-carbon solutions and domestic supply chains for low-carbon products. The investments noted by Ms. Johnson will work together with various regulatory measures to be delivered by Environment and Climate Change Canada to incent the production and use of clean fuels.

Let's start with carbon pricing, which, as you know, has been in place throughout Canada since 2019 and before then in various provinces. Carbon pricing sends a broad signal across the economy to spur the lowest-cost greenhouse gas reductions wherever they may be found. As part of its strengthened climate plan, the government proposed to increase the price of carbon by $15 per year, starting in 2023, rising to $170 per tonne in 2030.

This increasing carbon price will spur demand for cleaner fuel, which in turn is already leading to investments to increase the domestic production of cleaner fuel, which in turn should make them more affordable.

The clean fuel standard complements carbon pricing. The CFS is expected to lead to increased use and production of cleaner fuels and technologies while reducing emissions by up to 20 megatonnes at the end of this decade.

The clean fuel standard will require producers and importers of gasoline, diesel and home heating oil to reduce the life-cycle carbon intensity of their fuels. This life cycle approach will reduce the emissions associated with extracting, processing, distributing and using that fuel.

The CFS is a market-based tool. It creates a credit trading system and gives regulated parties flexibility in how to meet their requirements, as compliance credits can be created in various ways. Importantly, for the purpose of today's discussion, producers and distributers of fuels can comply by blending low-carbon-intensity fuels such as ethanol with gasoline and renewable diesel with diesel. This allows clean fuel producers to generate credits and make money by producing clean fuels that are sold to fuel producers for blending with fossil fuels. In turn, the increased incentive for use and production of clean fuels will create a market for feedstock providers such as farmers and foresters.

Using clean fuels in transportation will be a key part of Canada's transition to a low-carbon economy, given that transportation is responsible for about a quarter of our emissions.

I emphasize this because this multi-faceted approach to transportation emissions is illustrative of the overall approach the government is taking to address climate change through an economic development lens. We will influence product design by continuing to establish increasingly stringent emissions regulations for vehicles and engines, most of which will be aligned with the U.S. standards in recognition of our highly integrated markets.

We've put in place market-based regulations like carbon pricing and the CFS to influence consumer decisions and fuel production composition. We complement those measures with various programs such as those being delivered by NRCan to support increased research and development and investment in the increased production of clean energy, low-emitting products and clean technology.

In conclusion, the global energy sector is undergoing a significant transition and there are significant opportunities for Canadian-made clean fuels. The strengthened climate plan seeks to establish an integrated approach to reducing greenhouse gas emissions in ways that enable the low-carbon transition of Canada's important energy sector.

We look forward to contributing to and learning the results of the committee's review of this important issue.

Thanks.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Moffet. I appreciate that. There's no need to apologize for any potential technical challenges. We all have them several times every day, I can assure you.

Last up is Dr. Jennifer Littlejohns from the National Research Council of Canada.

[Dr. Jennifer Littlejohns, Director, Advanced Clean Energy Program, National Research Council of Canada]

Thank you, Chair and members of the committee, for the invitation to appear before you today.

My name is Jennifer Littlejohns. I am the director for the advanced clean energy program at the National Research Council of Canada. My educational and professional background is in the field of biological engineering and chemical engineering. Prior to my current role, I spent a combined 12 years as a researcher in the private sector and in federal laboratories, where I worked in the area of biofuels production from waste.

The National Research Council of Canada is Canada's largest federal research and development organization. Uniquely placed in the Canadian R and D ecosystem, the NRC is able to leverage relationships and build partnerships between academia, industry and the public sector. The work includes working with other departments—for example, those participating in today's panel. Through these partnerships, the NRC takes research impacts from the lab and brings them to the marketplace. Each year our scientists, engineers and business experts work very closely with thousands of Canadian firms and help them bring new technologies to market. In that vein, the NRC partners with many academic institutions, industry, and government organizations on a range of projects within the biofuels as well as the hydrogen space.

The NRC has been working in the area of bioenergy and clean fuels for over three decades and has provided R and D solutions to many industrial partners. Specifically, over the last eight years the NRC has worked with more than 30 industrial partners through the bioenergy program. These activities range from helping with the development of new technologies for pre-commercial advanced biofuels to also optimizing commercial processes.

Today I'll speak about two NRC programs focused on clean fuels production: the advanced clean energy program and the materials for clean fuels challenge program.

The advanced clean energy program examines greenhouse gas emissions reduction through emerging clean energy technologies. This program is supported in part through Natural Resource Canada's office of energy research and development. Through this program, we're researching areas that include the production of biogas, renewable natural gas, bio-crude and synthesis gas. The program has a focus on using problematic waste feedstocks for clean fuels production, including industrial waste water, food waste and municipal solid waste. Their use for clean fuels production can aim to both reduce waste while producing low-carbon fuels.

Besides waste, many feedstocks need to be exploited for clean fuels. Therefore, we are working with other federal labs, such as Natural Resources Canada's CanmetENERGY, which is working on complementary technologies for clean fuels production from forestry materials.

Hydrogen production technologies are also of interest under this program. The NRC is exploring longer-term opportunities in Canada through zero-emitting processes. An example is electrochemical processes. We also continue to work with counterparts at NRCan who are exploring options such as converting natural gas to hydrogen. Finally, we have activities on life-cycle analysis to identify the greenhouse gas intensity of various clean fuels. We work with other federal partners on that.

The materials for clean fuels challenge program is supporting technologies to convert waste carbon dioxide into net-zero fuels and the production of clean hydrogen using renewable electricity. The focus of the program is on early, high-impact, high-reward research in such materials as catalysts and membranes. There are currently 16 collaborative projects across four countries with partners from academia and promising Canadian start-ups.

Looking ahead, I welcome the opportunity to work with colleagues from NRCan as they establish and launch the clean fuels fund announced in budget 2021. I'd also like to state that the International Energy Agency has identified that biofuels and hydrogen are very key parts of the global effort, along with such other technologies as electrification, to meet greenhouse gas emission reduction targets.

With that, I'd be happy to any of your questions.

[The Chair, Liberal, James Maloney]

Great.

Thanks very much to all our witnesses.

Mr. McLean, I will turn the floor over to you.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you very much. Thanks so much to the witnesses. It's going to be an informative panel. I really appreciate your being here.

The first question I have goes to Mr. Jurgutis at Agriculture Canada.

Regulation around Canadian input of biofuels into our fuel stream has been around since 2010, yet we still import a significant amount of our biofuels from outside the country. That seems to be potentially politically sensitive to our trading partner, the United States.

Can you tell us why we should expect to see more biofuels produced in Canada going forward than we've seen in the past?

[Steven Jurgutis]

Sure.

I would say a few things. For a number of years there has been ongoing research as well as collaboration with industry to be able to advance the markets. I think that we've started to see an increase in the capacity to do this within Canada.

I think as well, as was mentioned as part of the other witnesses' testimony, that there are a number of programs in place that are going to be helping with this aspect over the next number of years. Chief among them would be the agricultural clean technology program, which is $165 million over seven years. This is going to help transform clean technologies and help farmers have the option to be able to help contribute to that.

I would say, based on the history of—

[Greg McLean, Conservative, Calgary Centre, AB]

I'll go back to the question. Can I interrupt for a second?

The question actually is, how much are we actually importing at this point in time? How will that change going forward in terms of producing more of our biofuels in Canada?

[Steven Jurgutis]

I don't have specifically the data in terms of how much we're currently importing. I can see if I can quickly find it.

[Greg McLean, Conservative, Calgary Centre, AB]

It's more than half the biofuels, isn't it?

We've been in this program since 2010, eleven years, and we still import more than half of our biofuels for our own consumption from the United States.

Is this correct?

[Steven Jurgutis]

Again, I think I would have to look at it specifically. I wouldn't want to misspeak before the committee in terms of the numbers. I don't know if other colleagues might have the answers for that.

I can certainly endeavour to find out specifically.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay, let me move on to one of the others. I appreciate it. Thank you.

NRC—

[John Moffet]

Can I provide an answer to Mr. McLean?

[Greg McLean, Conservative, Calgary Centre, AB]

Yes, absolutely.

[John Moffet]

Sorry, I don't have the volume, but there is a very significant difference. There is a policy initiative the government has recently introduced that explains why we are confident that we can change this flow of clean fuel.

The current regulations in provincial—with the exception of B.C.—and federal jurisdictions are volumetric regulations, so you just have to blend a certain volume of renewable fuel—

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Mr. Moffet, my question asks about how much is being imported right now as a percentage.

[John Moffet]

I thought your question was why is this going to change.

I'll tell you why it's going to change. It's because the current regulations are volumetric-based. Whereas Canadian clean fuels are typically of lower carbon intensity but more expensive, we're now moving to a carbon-intense deregulation that gives priority to low-carbon-intensity fuels. We're going to stop exporting our clean fuels and importing higher-carbon-intensity clean fuels from the U.S. and create a market for them here in Canada.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay.

Mr. Moffet, we'll go on here as well, if you can. I was going to go the the National Research Council, but you're on point here. Let's look at this in terms of life-cycle emissions, if you will, from these greenhouse gas amelioration facilities and products.

In a tank of gas, let's go with an 80-litre tank in a car. How far will it go on a full tank of non-diluted gasoline as compared to a tank of clean fuels diluted gasoline? Could you just give us a notion there, please, just quickly?

It's safe to say that 80 litres of pure gasoline, whatever the octane, is less productive with clean fuels in it, correct?

[John Moffet]

It will be somewhat less productive, yes.

[Greg McLean, Conservative, Calgary Centre, AB]

Yes, okay. Then there is a trade-off here in terms of how much we're actually consuming and power efficiency. The trade-off is between efficiency and cleanliness at the end of the day. I appreciate your input on that.

I'd like to go to the National Research Council and Ms. Littlejohns.

[John Moffet]

When we measure life-cycle emissions, we account for that difference. If a fuel gets a better life-cycle score, for example, we've accounted for the associated emissions per unit of energy.