Evidence of meeting #35 for Natural Resources in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was hydrogen.
A recording is available from Parliament.
11:50 a.m.
Bloc
Mario Simard Bloc Jonquière, QC
Let me ask you one last quick question. It comes from an article I read on carbon sequestration.
In your opinion, how safe are the carbon capture and sequestration strategies that you are aware of?
11:50 a.m.
President and Chief Executive Officer, Air Liquide Canada inc.
First, today, we know how to sequester gases in deep geological layers. At Air Liquide, we have been doing it with natural gas for a number of decades. We also do it with hydrogen. We currently have networks of hydrogen in the United States, in the Gulf of Mexico, where they have what they call caverns, in which hydrogen is stored. It is easy to imagine storing carbon dioxide in the same way, as it is a relatively stable molecule. That's the first point.
As for how effective the capture and sequestration processes themselves are, the technology has been in existence now for a number of years and it is reliable. We demonstrated that in 2018 at Port‑Jérôme in France. We have one unit of that kind in operation.
We have also been injecting carbon dioxide into geological layers for many years.
11:50 a.m.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Thank you. I'd like to continue on with Monsieur Masselot from Air Liquide Canada.
What's interesting to me with Air Liquide is that you have that capacity at every stage of the value chain, and a lot of what we've been talking about in this study is how we scale up these processes to get cleaner fuels in use across Canada and around the world.
I'm just wondering if you could perhaps expand on that scale-up. Especially, for instance, if we're going to use hydrogen for heavy transportation and other places where it seems to be best suited, what do we need to do? What are the important steps that you need to take in your company? How can the government incentivize that or help that to get this scale-up moving quickly? We obviously have to do that. What are the important steps? Are they hubs? What can the government do? Where can the government investments be best placed?
11:50 a.m.
President and Chief Executive Officer, Air Liquide Canada inc.
Thank you.
To begin, according to us, what is totally critical is to make sure that the investment we're going to do, scaled up larger, will be based on what we could define as encore customers. No matter if the encore customer is a large industry or basin, like a captive fleet of trucks in—I don't know—an airport, what's important is that it's based on solid, reliable, relatively continuous need of hydrogen, preferably, low-carbon hydrogen, to build a demand justifying the set up of the primary production of hydrogen. That's the first step. Then it would be far easier in the second step to add multiple other types of use, including intermittent ones. When we're dealing with transportation, notably passenger vehicles for example, it's very intermittent.
That's why, according to us, it's important to create or to build the demand. There, for sure, authorities and communities can help with their own fleets. It could be buses. It could be ferries. It could be trains. All of those captive fleets have the interest of very often, if not always, coming back to their original location. That means it's limiting, to a certain extent, the importance of the investment in terms of overall supply chain or the set up to be in a position to fuel vehicles. That's the first point.
The second important point is de-risking. I'm an industrial; I'm ready to take risks. That's why, by the way, I'm asking for a certain return. Nevertheless, we need a good level of policy alignment. We need to have strategies. We need to have an overall coordination. It's the same thing for regulations, ease of doing business and permitting, typically.
At the same time, it's key for us and for all players around the table, I'm sure, to do it in a safe and sustainable way. That's something we're doing now, if you are speaking about hydrogen, for four or five decades.
Last but not least, incentives will help as there's still, and it's known, an economical gap, not negligible, between volumes we need to hit and it's the scaling up or the ramp up where hydrogen or any other fuel—it's one that's a technical breakout parameter—will be at par with the historical way of fuelling for fossil fuels or others.
In a nutshell, that would be my answer.
11:55 a.m.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Thank you very much.
I'll turn to Mr. Lewis and ask more or less the same thing about the scale-up, if we have time. I don't know how much time I have, Mr. Chair.
11:55 a.m.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Okay, good.
Biodiesel seems that it could be a quick way to change things so we reduce the overall emissions, but how close are we to scaling up? How difficult would it be to scale up in terms of having the feedstocks to buy...?
Where would we be by 2030? Can we do this by 2050 to convert all our diesel stocks to biodiesel? That's where we have to be by 2050.
11:55 a.m.
Board Member, Renewable Industries Canada; Executive Vice-President Commercial Operations and Strategy at World Energy
Thank you very much for the question.
I think there is an immense opportunity to be able to expand. As I say, in California, we're taking this plant from 3,000 barrels a day when we bought it, up to 25,000 barrels a day. We're looking to make additional investments. We can expand our plant in Hamilton, Ontario. We can do that because we have to have a way to have transparent trading credits that can establish this market here. Right now, the California market has a very strong and transparent trading economy on carbon reductions. If we could establish that in Canada through the clean fuel regulation, that is going to attract investment and we will be able to scale up and make significant advancements.
That's not to mention we're constantly looking on every upgrade that we do to any plant. We assess that on a carbon basis as well. What is the most efficient way to do that? By generating more carbon reductions with every capital investment we make and every gallon we produce, we can achieve that faster.
Over the last 15 years that we've been producing, we have made investments that have made every gallon more valuable from a carbon reduction perspective, including upgrading the by-products to replace petrochemicals and things like that, which allowed us to get past a net-zero basis.
Noon
Liberal
The Chair Liberal James Maloney
Okay, we're moving into the next round for five minutes each.
We will start with Mr. Zimmer.
Noon
Conservative
Bob Zimmer Conservative Prince George—Peace River—Northern Rockies, BC
Thank you, Chair, and thank you to our witnesses.
Affordability is something that we've asked about many times. It has to be affordable for Canadians for them to pursue this. I think Dr. McKitrick brought up the disastrous policies in Ontario that led it to be the largest subnational debtor in the world. It was their electricity policy, subsidization and a bunch of other related issues that really caused these problems.
Dr. McKitrick, I'm concerned about the impacts in terms of affordability on our food costs. You did talk about it driving up costs. Can you speak to that effect?
Noon
Professor of Economics, University of Guelph, As an Individual
Yes. That's been a long-standing theme in the economics literature around ethanol and biofuels policy. There's competition with the food supply. The run-up in corn prices in the latter part of the last decade was attributed to an expansion, especially in the United States, of the ethanol mandate. We would expect to see the same kind of effect here in Canada.
When you look at the cost of the biofuels policy, it's fair enough for industry to look at their own production costs and say, “This is how much it costs for us to produce the ethanol.” However, from the economic analysis point of view, we also try to take into account all those second order effects in the economy, including, in this case, the increase in the price of food, because that's also borne by households.
Noon
Conservative
Bob Zimmer Conservative Prince George—Peace River—Northern Rockies, BC
Dr. McKitrick, again, following up on that, you mentioned some really alarming numbers. This is what we had been suspecting and we've read on our side about its effectiveness. Certainly, we all want renewables, we all want to do what's better for the environment, but when you said some numbers, such as for every three dollars spent, there's only a dollar benefit. You later said that for every six dollars of cost, there's only a dollar of benefit. That doesn't sound very effective to me.
Can you explain those numbers?
Noon
Professor of Economics, University of Guelph, As an Individual
There's a lot more detail in my written submission. In the case of the evaluation of the 2008 to 2012 biofuels policy, we tabulate throughout the paper all the sources of those cost numbers. Then we talk about the most optimistic estimate of the reduction of greenhouse gases that came about from the policy. That was the 3:1 ratio.
The second one was a macroeconomic model that looked at all the costs throughout the economy of this increase in fuel production costs. That number is larger because we're widening the scope of the analysis.
I do want to say the technology does change over time and the industry will be in the best position to say, “This is what we could do in the future.” However, it's still incumbent on you as policy-makers to do what Ontario did not do, which is to test those assumptions. Is this really going to lower the cost of electricity the way it claims?
June 21st, 2021 / noon
Conservative
Bob Zimmer Conservative Prince George—Peace River—Northern Rockies, BC
Right.
I'll just get in one more question for you, Dr. McKitrick.
Six to one doesn't seem very effective to me at this point. Like you said, maybe in the future it will be.
Being an economist, how do you make it effective? What needs to be done to make it effective, where we actually are seeing a dollar-for-dollar efficiency?
It's interesting on this side to hear all the complaints. I hear other members of the committee talk about incentivizing or subsidizing this when they decry subsidizing oil and gas. I would agree with them. I don't think we should be subsidizing oil and gas, but then, in some respects, we have to expect it on the other side of the coin.
Can you explain what can be done to make this an effective policy?
Noon
Professor of Economics, University of Guelph, As an Individual
I can't address the engineering aspect, but from an economic point of view, our reasoning around environmental policy generally is to pick one instrument and let it do its work. The government has chosen carbon pricing. If carbon pricing works and if these numbers are favourable for ethanol and biofuels, the market will make that switch. However, if you think that you need a lot of mandates and rules in addition to carbon pricing, then in effect you're saying that you don't believe those cost numbers that the industry is reporting are valid.
I would tell you to pick a price that you think is appropriate for CO2 emissions, then let the market find the lowest-cost way to achieve the emission reductions.
12:05 p.m.
Conservative
Bob Zimmer Conservative Prince George—Peace River—Northern Rockies, BC
Doctor, thank you.
Thank you, Chair.
12:05 p.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you, Mr. Chair.
Thank you to all the witnesses for being here today. There's been lots of really interesting testimony.
I'd like to ask my first question of Dr. McKitrick to continue on that line.
You mentioned perhaps some preference of using one economic instrument. You highlighted the price on pollution. You saw that as perhaps the best way of leading to some of these fuels...switching to lower carbon fuels.
In your analysis, what level do we need to see per tonne on greenhouse gases to start encouraging some of that price switching that you'd like to see in the market?
12:05 p.m.
Professor of Economics, University of Guelph, As an Individual
Any price you put in place will establish a threshold, so that the market then has an incentive to find the emission reductions that cost less than that amount per tonne. We would expect that, already at the $20 to $30 range, we would be seeing the market working to find those.
In the case of motor fuels, demand elasticities are very low. Demand is very resilient. In that case, it's possible to calculate. I believe the number we would need as a carbon price to hit Paris targets would be about $230 or $240 a tonne.
A better question at that point would be what an appropriate price per tonne is as far as the estimated social damages go. That may not be consistent with specific targets like net zero and Paris.
12:05 p.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you.
I'd like to ask Monsieur Masselot my next question.
Earlier this year you inaugurated the largest proton exchange membrane electrolyzer in Quebec. I'm curious what made you decide to open this facility in Quebec relative to some of the other areas around the world where you work.