Natural Resources Committee on June 7th, 2021

[The Chair, Liberal, James Maloney]

I call this meeting to order.

Thank you, everybody, for joining us on Monday. Thanks for your patience in getting going. Technical problems are not uncommon.

Welcome to meeting number 31 of the Standing Committee on Natural Resources, which is on low-carbon and renewable fuels in Canada.

I would like to welcome Mr. Brunelle-Duceppe, who is here for Mr. Simard.

Thank you for joining us.

We have three witnesses today. We have Dr. Mark Jaccard from Simon Fraser University. From Hy2gen Canada Inc., we have Cyril Dufau-Sansot, president; and from the Transition Accelerator, we have Dr. David Layzell, who is in 40 centimetres of snow, I'm told, in Banff today.

Welcome, all three of you. Each of you will be given up to five minutes to make your opening remarks. Following that, we'll open the floor to questions from the members.

You can speak, and are encouraged to speak, in either official language, or both. You have translation available at the bottom of your screen. If there are any problems, please let us know.

Five minutes is a hard stop for your opening remarks, and then each of the members has a time limit as well.

I will start with Dr. Jaccard.

[Dr. Mark Jaccard, Distinguished Professor and Director, School of Resource and Environmental Management, Simon Fraser University, As an Individual]

Hello. Thanks for inviting me. I'll get going.

In my remarks I focus on two challenges related to your study. Because of the tendency of some people to let perfection be the enemy of good, you might have heard strongly negative statements about biofuels and biofuel regulations, but I caution you to discount such extreme positions because evidence supports a more nuanced view. I explain things like this in my latest book, The Citizen's Guide to Climate Success: Overcoming Myths That Hinder Progress. That's the kind of focus I bring to your committee today.

It's actually a simple challenge that we have and a simple solution. We have to use carbon pricing and regulations to replace the open burning of coal, oil and natural gas. It could be with renewable energy, some nuclear power and even still using fossil fuels with carbon capture and storage.

I focus the first part of my remarks on false negative claims about emissions of liquid biofuels. In my 30 years working on the energy transition, I've encountered some extremely negative views on biofuels. Even if unintended, these views can help people who would keep us on a fossil fuel-burning path. One hears that consuming biofuels won't reduce greenhouse gas emissions because burning biomass releases CO2. It's true that if we permanently transform a forest into a desert to make biofuels, this conversion will lead to an increase in atmospheric CO2 emissions, but if we produce the biomass for biofuels from sustainable forestry or agriculture, there's no net increase in atmospheric CO2. This is not my personal view; it's the view of the independent scientific Intergovernmental Panel on Climate Change.

One also hears that even if biomass can be a zero-emission source of energy, it's the production processes of converting it into biofuels that cause CO2 emissions. People refer to this as a life-cycle analysis, looking at the emissions in the growing, harvesting, transporting and processing of the biomass feedstocks that we use to make biofuels. However, again, the Intergovernmental Panel on Climate Change argues that this static life-cycle analysis approach is wrong. Biofuels can be produced using organic fertilizers, and with farm equipment, transport vehicles and biofuel processing plants that are powered by sustainably produced biofuels. Life-cycle emissions from the production of biofuels will be near zero when we implement policies that require it.

We can get a contribution from biofuels that might be, I don't know, 15% or 20% replacement of the liquid fuels that we're currently using in transportation. It's not the solution, but it can be part of that solution. This modest contribution in fact can be critically important. Biomass feedstocks then would come from forest and agricultural organic waste, sustainably managed forest plantations, converted marginal agricultural lands and some sustainable agricultural production that improves income and employment opportunities in our rural regions as part of the energy transition.

I focus the last part of my remarks—for as long as I can go on—on false negative claims about biofuel regulations. I'm an economist. I know that humanity could achieve net-zero greenhouse gas emissions with just one economically efficient policy: a carbon tax. It's technically and administratively possible to apply this one policy and keep it rising until emissions fall to zero, but a singular reliance on carbon tax is politically difficult. We all know all about that and I talk about it in chapter 6 of my book.

That's why leading jurisdictions like California significantly rely on regulations to reduce greenhouse gas emissions. We economists can be fine with this, because well-designed regulation can perform like a carbon tax.

I'll give you one quick example. To get to zero emissions in 2050, we must phase out the burning of fossil-fuel diesel trucks, but we don't know if trucks in 2050 will mostly use electricity, hydrogen or biodiesel, and we don't want government policy to send us down what ends up being the more expensive path.

However, guess what? If government implements a regulation that requires a rising blend of zero-emission biodiesel in regular diesel such that by 2050 the only diesel available for sale is 100% biodiesel, government has not picked the technology energy winner. The regulation has simply reached a level of stringency that bans fossil fuel-burning trucks, which is the same outcome as a rising carbon tax.

Under both policies, the future relative market shares in 2050 of electric trucks, hydrogen trucks or biodiesel trucks will be determined by their relative cost and the preferences of trucking firms. The regulation is technology neutral.

I'm going to end there with those two main points. One, be careful of blanket statements about biofuels being bad. It all depends on how we decide to produce them.

[The Chair, Liberal, James Maloney]

Thank you, Dr. Jaccard.

[Dr. Mark Jaccard]

I'm done. Thanks for your attention.

[The Chair, Liberal, James Maloney]

Thank you.

Next is Hy2gen for five minutes.

[Cyril Dufau-Sansot, President, Hy2gen Canada Inc.]

Thank you for inviting me to share our vision of clean fuels and the role we hope to have in that marketplace.

I will start with some background on our company, Hy2gen and its Quebec-based subsidiary. We want to develop companies that produce green hydrogen from renewable power and to expand the use of green hydrogen globally through massive deployment. However, the logistics solutions to transport green hydrogen on a massive scale are not sufficiently advanced, making it extremely costly. Our goal is to produce biofuels using green hydrogen, so green fuels, and leverage existing logistical infrastructure to deploy green hydrogen production on a massive scale globally.

Today, I want to draw your attention to another biofuel, one on the fringes of conventional biofuels such as renewable natural gas, biomethanol and ethanol. I am talking about green ammonia. As one of the main products in the manufacture of fertilizers, ammonia is often associated with agriculture. It is important to note that green ammonia is also a very efficient fuel, allowing an aircraft to exceed Mach 6 for the first time in the 1950s. Green ammonia is produced by combining nitrogen from the air with hydrogen. To date, it has conventionally been made from hydrogen derived from fossil fuels, mainly natural gas. We want to use renewable energy to not only capture nitrogen from the air, but also produce green hydrogen via water electrolysis and combine the two gases to produce green ammonia.

As a fuel, green ammonia holds tremendous appeal for sectors that are very energy-intensive, beginning with marine transportation. One of our shareholders is Trafigura, a top commodity trading company. It is actively engaging international marine authorities to promote green solutions and encourage the world's marine operators to adopt clean fuels, through the implementation of bonus-malus systems, based on the avoidance of CO₂ emissions, or taxes on CO₂ emissions. The idea is to promote clean fuels like ammonia, which holds tremendous potential for the marine transportation sector.

That opens the door to producing large quantities of ammonia in places where renewable energy is readily available and economically attractive, thereby justifying the creation of green hydrogen production facilities. What's more, it is extremely cost-effective, since establishing very large plants on a massive scale has the benefit of a scale effect. The green hydrogen produced provides a widespread-use alternative to conventional fuels and synthetic renewable fuels, which will have paved the way for this transition.

It is essential that regulatory decision-making related to clean fuels take into account green ammonia, which can replace the widespread use of conventional fuels. I mentioned marine transportation, and now I will turn to uses in Canada and Quebec, where we have our first facility, which uses approximately 250 megawatts of electrolysis power to produce green ammonia. Little by little, we are transforming fuel uses to ensure that, in the next 15 to 20 years, the use of green hydrogen will benefit from the amortization of units that have been set up now to support carbon-free transportation across the board, whether by sea, land or air. Aviation fuel is another possibility. Hydrogen-powered aircraft are already being developed.

I felt it was important to share this vision with you today.

[The Chair, Liberal, James Maloney]

Thank you. You're right on time. It's always appreciated.

Last, we have Dr. Layzell for five minutes.

[Dr. David Layzell, Energy Systems Architect, The Transition Accelerator]

Thank you very much. It's a great privilege to be here today.

Low-carbon fuels have been a major focus of my academic career for more than 20 years. Over the past two years, I've been helping to launch the Transition Accelerator, a pan-Canadian non-profit that is focused on achieving net-zero emission energy systems in a way that creates jobs and stimulates the economy.

There is a rapidly growing global consensus that to achieve net-zero emissions, virtually all carbon-based energy carriers, such as gasoline, diesel and natural gas, must be replaced with zero-emission energy carriers, such as electricity and hydrogen. Of course, these energy carriers must be made with little or no greenhouse gas emissions.

This might sound like bad news for Canada, but it is not. Canada is internationally renowned as one of the world's lowest-cost producers of low- or zero-carbon electricity and hydrogen.

Electricity is an excellent energy carrier for personally owned vehicles, for light-duty transportation, and space heating in more moderate climates.

However, I want to focus today on hydrogen as the net-zero fuel of choice for heavy-duty and long-distance transport, essentially those markets that are now served by diesel; space heating, especially in cold climates and for large buildings; and heavy industry, such as steel making.

By 2050, hydrogen could deliver 30% of the secondary energy demand in Canada, and feed a major energy export industry, while adding about $100 billion a year to the Canadian economy, and delivering somewhere between 25% to 50% reductions in national greenhouse gas emissions.

When hydrogen is made from the electrolysis of water with renewables or nuclear energy, it is often called green hydrogen. On the other hand, blue hydrogen is made from fossil fuels, such as natural gas, when the byproduct CO2 is captured and sequestered in geological reservoirs. Both green and blue hydrogen are low carbon, and both will reduce life-cycle emissions by 90% or more when displacing diesel use in heavy transport.

Some provinces are better positioned to make green hydrogen, while others are better positioned to make blue hydrogen. Either way, hydrogen could provide a shared pan-Canadian vision for a clean energy future. This is a rare opportunity for this country.

The challenge with hydrogen is that it is a gas, so it is more expensive to transport and store than liquid fuels, such as diesel or gasoline. Canada can actually make low-carbon hydrogen at about half the wholesale cost of diesel fuel. However, getting the hydrogen to market is only cost-effective if it is done at large scale, serving dozens to hundreds and thousands of users.

How do we get there from here? There are four points I want to make.

Number one is to focus on the entire value chain, linking both policies and public funding to build new energy systems in a coordinated way.

Number two is to understand the level of ambition that is required. Every year there are over 5,000 buses and 34,000 heavy-duty trucks sold in Canada. To put Canada on a transition path to net zero, one-third of these, or 13,000 vehicles per year, would need to be hydrogen fuelled by 2030. This is a challenge, since large vehicles of this type will not arrive in Canada until 2022.

Number three is that early investments are needed in pilots and demonstration projects for vehicles, fuelling stations and low-carbon hydrogen production. These are important to stimulate interest and build confidence in a new hydrogen value chain.

Number four is to concentrate investments on hydrogen hubs. Over the next five to seven years, substantial public investments must be focused on a limited number of regions that can bring together low-cost hydrogen supply, efficient transport and substantial demand.

In conclusion, hydrogen is an essential energy carrier in a net-zero energy future. Canada is well positioned to take a leadership role, but we must act now.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much.

We'll move to our first round of questions.

Mr. McLean, I understand you are going first. You have six minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

We have a great panel here today on the issues in front of us. Thank you very much, gentlemen, for appearing before us today.

The first question is for Dr. Jaccard. He made reference to the blanket statements of biofuels being bad.

Dr. Jaccard, I appreciate that you're an economist. Have you seen the analysis done by Thunder Said Energy? It is a group out of the U.K. It indicated that the life-cycle carbon footprint of biofuels was approximately twice that of the fuels it replaced.

[Dr. Mark Jaccard]

No, I have not seen that study. I have seen many studies that have claimed that over the last 20 years. That was the point of my opening comments, because I can look at that study, too, and I have known from the 20 or 30 I've seen before this that people have done this using a static analysis. That's what I was referring to: that it's not “How are we doing it?” when we don't regulate the emissions produced when using biofuels but “What is possible?”

If we're talking about hydrogen or ammonia, we're talking about how we regulate something. There are Dr. Layzell's comments about how producing hydrogen from natural gas involves regulations so that you don't do it the way we are now.

The point of my comments is this: If you regulate the life-cycle emissions, what can be the production? I've seen a lot of data with regard to cases where biofuels are made with zero emissions—life cycle.

[Greg McLean, Conservative, Calgary Centre, AB]

We haven't seen that, actually. We've actually seen a whole bunch of contrary evidence.

Let me ask you even further here, if we go down this path. If you think about a static supply or a growing supply of biomass being used for consumption as food in the world, the consumption of biofuels, as in canola, is going to require a diversion of that fuel or that foodstuff biomass towards fuel production. How do you justify that that's not going to require more land mass as a result?

[Dr. Mark Jaccard]

I've done a study for all of Canada, in fact, and I'll make it available to the committee. I did it a few years ago.

What I said in my statement was “Here are the processes you would follow.” This is what Scandinavia is doing right now. You would make sure that it's sustainable forestry and that you're using forest waste. You make sure that you're using agricultural wastes. You make sure that you're converting marginal lands and—

[Greg McLean, Conservative, Calgary Centre, AB]

Those are biogases in many respects. Those aren't biofuels. We're talking about creating biofuels here, from fresh stock, in many respects, to get there.

The biofuels industry itself understands that it takes 1.6 units of power to create one unit of power to come out the other end. That, of course, is clean, as we define it, versus hydrocarbon energy.

How does that actually square up as being energy efficient at the end of the day and not creating more actual greenhouse gas as you say the 30 studies you've read have shown?

[Dr. Mark Jaccard]

These are all static analyses, and it sounds to me like you're giving static analysis as well. It sounds to me like you're refusing to look at some of the ways in which we are producing biofuels.

Again, I am looking at Scandinavia, but I'm also looking at Scandinavia making agreements with people who are providing the biofuels. I'm also looking at Brazil. I'm looking at many cases where we can make—

[Greg McLean, Conservative, Calgary Centre, AB]

I'm sorry, Mr. Jaccard. We're talking about production here. We're not talking about deals. We're talking, actually, about the CO2 production from biofuels.

I am going to move on. Thank you for your input.

I'm going to move on to Hy2gen, because I am interested in green hydrogen. I'm interested in the environmental footprint of green hydrogen and, actually, steam methane reforming versus electrolysis. Electrolysis is, obviously, much more energy intensive, if you will, at the end of the day.

Can you tell us about the overall environmental footprint of electrolysis versus steam methane reforming, please, Mr. Dufau-Sansot?

[Cyril Dufau-Sansot]

Yes, it's important to take into account the energy efficiency of water electrolysis from non-renewable electricity, which is of course lower than in the case of methane reforming. That is why I do not recommend water electrolysis using non-renewable electricity.

Conversely, when 100% renewable electricity is used, the environmental footprint is very low because, regardless of efficiency, the electricity is renewable, meaning, it is available and merely needs to be captured. Whatever the efficiency of a wind turbine, a hydroelectric station, solar panels or an electrolyzer—which, might I add, is now nearly 65%—the energy is 100% renewable.

[Greg McLean, Conservative, Calgary Centre, AB]

Mr. Dufau-Sansot, thank you.

I have a recent study here from Bank of Montreal Capital Markets. It does say that electrolysis uses twice as much water and five to six times more energy than steam methane reforming as green hydrogen.

We accept that we're going to need all kinds of hydrogen going forward here. What we want to do is make sure that we understand the carbon footprint of each of these going forward. With five to six times more energy required for electrolysis versus steam methane reforming, it does seem to indicate that the actual CO2 emissions can be higher.

You're exactly right. The power from wind, nuclear and hydro are the lowest footprint, but you still have a lot of energy here that translates in the end into a lot of CO2. Do you know this analysis?

[Cyril Dufau-Sansot]

Electrolysis does not emit CO₂, unlike natural gas reforming. When a gas molecule is broken up, the carbon in the gas goes into the atmosphere, but when a water molecule is broken up using electricity, no CO₂ is emitted because it does not contain any carbon.

Of course, it is an energy-intensive process from an electricity consumption standpoint, but natural gas reforming is also energy-intensive given the loss of energy contained in the natural gas. Only the hydrogen energy is recovered when a natural gas molecule is broken up.

I think it's a false argument to draw such a direct comparison between the two methods.

[The Chair, Liberal, James Maloney]

Thank you very much.

Thanks, Mr. McLean.

We'll go to Mr. Lefebvre.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here this morning. What they have to say is extremely informative, especially since the topic of our study is an issue of significant concern.

I'm going to start my questioning with Dr. Layzell.

You talked about what we need to do with the value chain, which is to be ambitious, make early investments and create these hubs. You then said that we must act now.

Some of the big items that you're talking about.... There are certainly the top four things that we need to do, but for the purpose of our report, we sometimes like to have specific granular suggestions as to how we accomplish all of these.

What can the federal government do to act now to ensure that Canada has a chance to be a world leader in the sector and to take advantage of these opportunities? You talk about these financial opportunities and this transition. That's the name of the group you're with, Transition Accelerator.

This is very important to our country, so I want to hear more in depth for about a minute. Perhaps you could get really specific with us as to what you would want to see the federal government do to really help to accelerate this transition.

[Dr. David Layzell]

Certainly.

I think the Canadian hydrogen strategy that came out just before Christmas identifies a lot of very specific recommendations. We certainly had a lot of input into that, but we weren't the authors of it. I would point you to that.

In terms of specific things that are needed, I would argue that we need to start getting out there and running pilots for hydrogen for both green and blue hydrogen production in concentrated areas where we need vehicles. Bring in hydrogen-using vehicles, especially in the heavy-duty fleet—buses and heavy trucks—and try them out. Put them through paces and see how they operate under Canadian conditions.

We need to be doing the kind of detailed techno-economic analysis that basically starts to design a new energy system that will actually be capable of achieving net-zero emissions by 2050. Obviously, it's complex. We're talking about building a new energy system essentially from scratch. We don't want to see a lot of stranded assets, so we want to actually figure out how we go from the complex energy systems we have today—carbon-based—to carbon-free energy systems, both with different green and blue hydrogen production and with whole new value chains. We have to figure out how to build those. Resources are needed in order to make this happen, both in demonstrations and in hydrogen hubs.

[Paul Lefebvre, Liberal, Sudbury, ON]

I'll let Mr. Jaccard talk about that as well.

I'm interested as well, Mr. Jaccard, in this whole notion that you raised about static analysis versus fluid analysis. It's very important that we have that in our report. There certainly is an opinion out there that it's just as expensive to create one or create the other and the effect of greenhouse gas emissions is the same.

I'd like to hear you on the opportunities and on the static analysis piece that you mentioned.

[Dr. Mark Jaccard]

The economist in me is neutral in terms of the points about hydrogen, how it's made, where it comes from and what it's potential is, especially in transportation, of course, and likewise for electricity.

I still am of the opinion that we should make sure not to pick the winner, but, of course, government does, and hopefully your report talks about how government might create conditions that are favouring certain things. David Layzell talks about how, if we're going to have hydrogen, we need to do some of those. Government needs to step in, and I agree with him.

My point is simply that, if you're getting to zero emission, the world gets a lot simpler, because it means, not only in the end-use combustion of something are you thinking about CO2, and is it in a closed loop however you're getting it, but you have to think about the entire production process. Just to give you an example, in British Columbia we have a low-carbon fuel standard. It's where people can sell and trade credits for how they are reducing the life-cycle carbon intensity of fuels, ethanol and diesel, that are used in transportation. If you look at the charts, you see producers who are ranked to be net zero in their life-cycle emissions.

My point is simply that our policies have to be right across the economy. When you do that, you will produce some ethanol, and you will produce some biodiesel, and they will be zero emission life cycle. What their cost compared to life-cycle zero emission hydrogen and life-cycle zero emission electricity will be, depending on the end use.... I don't know who will win.

I do know that in Scandinavia right now, 20% of liquid fuels are from a biogenic origin. Some of it's imported; some of it's produced locally, and some of it is really focused on having zero life-cycle emissions.

It's that policy you need, and then I don't worry so much about the outcome.

[Paul Lefebvre, Liberal, Sudbury, ON]

Very quickly on the policy in Scandinavia, are there any lessons to be learned of how they got to 20%?