Natural Resources Committee on June 18th, 2021

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thanks for that.

My next question is for Mr. Plumptre.

You mentioned in your opening the importance of things like the clean fuel standard and other policies to ensure that we're not picking winners and that we're going to have a portfolio-based approach and have the certainty for investment going forward in some of these lower-carbon products in the future.

My question to you is this: What risk do you see to investment today in the technologies that we're going to need for this type of a low-carbon future when you see other parties perhaps putting out policies or suggesting policies that would be less ambitious or that would eliminate some of these different mechanisms that are proposed?

[Bora Plumptre]

It's a great question. Thank you.

To take the example of the federal low-carbon fuel standard or clean fuel regulation, actually we have a proposal from the leader of the opposition that would see the stringency of the signal of that policy actually go beyond what is currently proposed in terms of the average life-cycle carbon intensity of fuels by 2030. The CFR right now, as proposed, is aiming for about 13% by 2030. In B.C., provincially, it's already at 20% and it's similar in California. They're already into the second phase of their program.

I would say that it's understandable that Canada is just starting to get going, but other jurisdictions are already moving ahead, and the potential risk lies in some of these fuels that do present an opportunity to make a near-term contribution to our emissions reductions, as Mr. O'Connor was emphasizing in his remarks. Some of these fuels, such as renewable diesel, are promising and could play a large role in mitigating those residual emissions that still occur in the transportation sector and passenger transport as they are increasingly electrified, but we're still going to be dependent on liquid hydrocarbon fuels in both the light- and heavy-duty sectors for a long time to come. Those residual emissions could be substantially reduced if we increased our shares of things like biodiesel and renewable diesel.

The risk right now is that other jurisdictions are moving ahead. In just the past year, I think, U.S. petroleum refiners—and there have been several including Marathon, Phillips 66, Chevron, Renewable Energy Group and HollyFrontier Corporation—have been making multi-billion dollar investments in upgrading their refining operations, and we're, so far, not seeing too much of that type of activity here in Canada, although it does seem to be the case that some investments are starting to be announced now that we're getting to the point of actually implementing the regulation, so I'm encouraged by that.

[The Chair, Liberal, James Maloney]

Thank you.

Thanks, Mr. Weiler. I'll have to stop you there.

We will go back to Mr. Simard for two and a half minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I'd like to turn to Mr. Wolinetz, who spoke earlier about biofuels and the green jobs that can be associated with them.

We commissioned a study on the potential of the Quebec forest. Over the next 10 years, there are 16,000 potential jobs in the forestry sector. Unfortunately, the federal government's support is still missing.

For example, Elkem Metal will produce biochar, which is used in a metallurgical process that significantly reduces the carbon footprint. However, it won't receive a cent from the federal government.

If we want to develop a strategy to maximize forestry waste and forestry biomass, don't you think that we should have a federal government strategy to that effect?

[Michael Wolinetz]

I agree, actually. I think there is a significant opportunity for clean energy production and for economic development in the forestry sector. I personally feel that it would be of equal importance to hydrogen, so in that sense a federal strategy could be a helpful thing.

That said, to drive the growth of that overall sector, I still believe it's better to set the policy that would create the market conditions to make it happen in the long run, in the big picture.

[Mario Simard, Bloc, Jonquière, QC]

Thank you. I find this interesting.

In the interest of market development, do you think it would be worthwhile for a federal government procurement policy to include carbon footprint as a criterion?

[Michael Wolinetz]

Government procurement could be a very useful tool to create the early market conditions that help this industry or sector get going, but to fully scale it up, I don't think government procurement would be necessarily the correct tool. You'd want to be addressing the carbon intensity of the wider pool of fuels the way that the clean fuel regulation does.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Simard. You're out of time, unfortunately.

Mr. Cannings, we'll go over to you.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'd like to pick up on something that Mr. Zimmer was asking about and maybe turn it over to Mr. O'Connor, in terms of the narrative that we want to use our natural gas reserves and resources in British Columbia to export those.... The climate argument there is that this would replace coal and be a good thing for the world.

I'm wondering if there's been any life-cycle analyses of that whole process and how natural gas compares to coal, and if there's anyone on the panel today who could talk about the future of Canada's natural gas exports in this changing world of different fuels.

[Don O'Connor]

There have been a number of studies done in various locations looking at natural gas versus coal, and there have been a few done looking at exported LNG displacing coal. That information is available. I think the push-back you get from people is, well, how can we be 100% sure that it's displacing coal and not adding to additional energy demand?

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you very much for that.

Turning to Mr. Plumptre, you mentioned that these clean fuel standards were more stringent in some places and that we needed regulations that were increasingly stringent. I'm wondering whether you could elaborate on where Canada needs to go with our clean fuel standards to achieve the best results.

[Bora Plumptre]

Thank you, Mr. Cannings.

I believe that the clean fuel regulation is fundamentally on the right track, but I think that we've ended up in a situation, just given the length of time it's taken to develop this admittedly fairly complex policy, in a place where the regulation is perhaps a bit unbalanced relative to what was originally envisioned.

When the government announced the clean fuel standard, as it was then called, back in 2016, they were targeting 30 megatonnes of emissions reductions by 2030. That scope of ambition and the scope of the coverage of the policy was reduced by about a third in favour of carbon pricing last winter, under the healthy economy, healthy environment plan, along with the commitment to quite drastically increase the rate of growth in the carbon price. That was a reasonable policy decision to make. However, as a result, I think the design of the clean fuel regulation has ended up in a place where there were all kinds of flexibilities introduced into the regulation to account for the fact that it was originally intended to cover liquid, gaseous and solid fuels, and now it's only focused on liquids.

[The Chair, Liberal, James Maloney]

Thank you. Thanks, Mr. Cannings.

We'll go back to Mr. Patzer for five minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much.

Mr. Wolinetz, in your opening remarks, you touched on something that's extremely important in my riding and in a lot of areas across the country, and that's the impact on rural Canadians.

I'm concerned about the viability for rural Canada going forward, especially as the cost of living and the cost of energy go up with these, whether they be policies like the carbon tax and clean fuel standards and regulations, or just the transportation costs they're going to have for all of this change in energy. We also know that it's going to have a disproportionate impact seniors on fixed incomes and have a massive impact on people who are already living in energy poverty in our urban communities.

When we're looking at jobs for rural Canada, one of the strengths of rural Canada is that you can live with a lower wage—or at least it used to be the case that you could make minimum wage or a little higher and still be able to afford to live in rural Canada. These days, that's not so much the case, because the cost of everything is going up. This energy transition continues to drive costs higher for these people, but the wages don't increase with them.

For the people in rural Canada and for seniors on fixed incomes and people in energy poverty, how can we justify continuing down this path that we're headed on?

[Michael Wolinetz]

Certainly, I don't think greenhouse gas reduction and poverty reduction are mutually exclusive. You may need to implement separate and unrelated policies to ensure that you're not unduly affecting people on low incomes or seniors on fixed incomes.

In terms of rural living, there are some real opportunities within a bioenergy system to increase employment in those areas. You would be increasing wage rates and increasing well-being. Certainly, it's not necessarily the case for all people who live in rural areas, but none of this is going to affect their collection and use of heating wood, so that's on the one hand.

On the other hand, there's just the natural turnover of our stock of vehicles, our furnaces and our water heaters. The impact of minimum energy efficiency regulations means that people's energy costs also have a downward force acting on them. It's not just that fuels will get more expensive, but that generally speaking, over the years and decades, indeed, the efficiency of everybody's equipment is going up. That can mitigate a lot of this.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

The efficiency side of things is definitely good and benefits everybody, but on the government regulations, it states right in them that the avenues they are pursuing are going to disproportionally impact these people. To say that they're mutually exclusive is not necessarily the case. We know that GHG reduction is the point of a clean fuel standard and the point of the carbon tax, and it states clearly, right in it, that those people are going to be disproportionally impacted.

[Michael Wolinetz]

Sure. What I mean is that the goals of those policies are not mutually exclusive. You can use revenue recycling in any number of ways to try to mitigate the economic impact on certain segments of the population. You can use changes to your tax policy to do the same. You can use other sorts of policies to mitigate that.

I think that you—and everyone—are always concerned for lower-income segments of our society. In implementing greenhouse gas policy, we should always be mindful of how it impacts them and should consider adjustments to the policy or, in fact, other policies outright, in order to make sure they're not unduly affected.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

This question will be for you and could be for any of the others if they want to answer it as well.

Right now, we're seeing a shift to combined-cycle natural gas power plants in Saskatchewan. There is one that was just built, just northwest of Swift Current, and it provides I think around 353 megawatts of power. Basically, it can do 350,000 homes or more. It has tremendous baseload power. It's natural gas, so it's cheap energy.

Are these units going to continue to be viable going forward? Are biofuels going to be an option to be used as well in these power plants going forward?

[Michael Wolinetz]

In the work we've done, we see that by 2050 you'd need something pretty close to a zero-emissions electricity sector, which means that using natural gas, even efficiently in a combined-cycle power plant, is not compatible with that. You can decarbonize the gas stream. You could inject renewable natural gas or even hydrogen, and then there are modifications that would be required to make that turbine still operate with a high amount of hydrogen in it.

That being said, these units 30 years out may still be viable in terms of adding support to the system. They're there. They're standing by. You would use them very rarely, but they're still part of that system in terms of offering a diversified and reliable source of power should it be needed.

[The Chair, Liberal, James Maloney]

Thank you. Thanks, Mr. Patzer.

We will go over to Mr. Longfield.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Chair.

Thank you to the witnesses. It's been a terrific discussion today.

I'm subbing on the committee today. I normally sit on the environment committee.

I see that we also have a University of Guelph alumnus with us today.

Dr. Zacharias, welcome. It's always good to have Guelph in the House. I see that you have your Ph.D. in Zoology from the U of G.

I want to start my questioning with you, Dr. Zacharias.

In terms of the infrastructure needed for the transition to hydrogen as a fuel source in transportation—and here I'd note that I'm also co-chair of the automotive caucus with Mr. May, who's also in this discussion—we have looked at the larger vehicles being powered by hydrogen, versus electric vehicles. Linamar, in Guelph, is working on that transition, but we'll need a network of hydrogen supply for vehicles.

You mentioned a little about infrastructure in your comments. Could you expand on that a bit, and what we would need to do through the work of NRCan?

[Dr. Mark Zacharias]

Thanks for the question.

If hydrogen become more favourable as a technology for medium and heavy-duty vehicles than batteries, then a huge scale-up is going to be required nationwide.

Right now, batteries are winning the battle on light-duty vehicles. Batteries are winning the battle on last-mile delivery vans. They're winning the battle on basically urban transit buses, as you saw with Ottawa's announcement yesterday, and the TTC.

Hydrogen is a kind of long-term transport fuel. It's really probably for semi, class eight-type trucks—and that's probably it right now.

Looking at the U.S. and what the Biden administration is looking at doing to scale up U.S. electric charging networks, I just don't know that it's possible for Canada to do the same with hydrogen, other than for the major Trans-Canada highways at this point. A lot of work needs to be done.

[Lloyd Longfield, Liberal, Guelph, ON]

Out your way, Ballard has been involved for many, many years.... I worked with Ballard on some of their systems in the mid-nineties, and they were looking at trains and at larger vehicles, as you said, the class eights—class fives would be EVs—but actually getting large shipments across the Trans-Canada. NRCan is funding the Ivy network in Ontario for electric vehicles.

As you said, there's a challenge there.

[Dr. Mark Zacharias]

Absolutely, and the additional challenge is that Canada has globally the cheapest electricity rates in the G7. Again, that's another tick against hydrogen as a transportation fuel for Canada.

It may make sense for hydrogen buses in China and other countries, but it will be more difficult in Canada to scale up the hydrogen infrastructure and compete against battery electric vehicles.

[Lloyd Longfield, Liberal, Guelph, ON]

To continue in that argument, if we look at Japan going to zero-emission vehicles, the study we looked at in the environment committee as well, Europe going to zero-emission vehicles, we may be buying vehicles that are zero emission and the market might be ahead of us in terms of us delivering policy and programs.