Natural Resources Committee on Jan. 31st, 2022

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I've been calling it ERF, but I'll call it the emissions reduction fund. That is kind of a complementary piece on top of the regulations. It's an incentive that's built on top of that.

[Jerry V. DeMarco]

If it were carried out in a way that was in keeping with the additionality principle, then I would say that it was complementary, but in fact, it was partly complementary and partly duplicated.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

That's a fair answer to that. That's what I was seeking. It's sort of a different route from the purely regulatory piece. We have the regulatory piece and then we have this other measure, which, if I am following what your recommendations are, would be that complementary piece.

Is that fair?

[Jerry V. DeMarco]

Yes.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I was looking at some pieces about that.

If all your recommendations were taken into account going forward, then would you feel that it would be an important piece to have that incentive over and above the regulations that are in place?

[Jerry V. DeMarco]

The choice of measures is up to the government of the day, obviously. If carried out properly—and that's what our six recommendations are aimed at.... This program isn't over, and if there are similar programs in the future, we would like them to be carried out as efficiently and effectively as possible.

If this is the choice of measure—and perhaps in the next hour you'll be hearing from others about more policy-level issues—then our recommendations are aimed at improving the performance of this type of measure, yes.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

That's great.

This audit was of the first intake, and there have been some changes made to the third intake.

Would you be planning on auditing once again, to see how that third intake measures up?

[Jerry V. DeMarco]

It's certainly a possibility that we'll do a follow-up based on the third intake. We looked at the first intake. The second intake happened after the end of the audit period but before today, and then the third intake period is the present one.

Most of the funds are still available in the original $675 million, so it's possible that we'll do a follow-up. It'll depend in part on a number of factors, including whether we believe there's a risk of continued problems with the third intake. In that vein, we will look at the changes that have recently been announced by Natural Resources Canada to see whether they meaningfully address the recommendations in our report.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

In some commentaries about the program—I don't have very much time—I saw that some stated that 97% of the emissions reductions from the emissions reduction fund came from projects that eliminated intentional routine venting and flaring as opposed to reducing. Does that line up with your audit?

[Jerry V. DeMarco]

I believe the reference is 97% of the projects included going beyond the methane regulations. I don't believe it was 97% of the emissions though. A project could be meeting and then exceeding. If a project did both, then it fell within that number that you're speaking of, but I don't believe the 97% refers to the emissions amount.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I'll double-check that, but I appreciate that.

I see that I literally have about 10 seconds left, so I'm just going to give those back to the floor.

[The Chair, Liberal, John Aldag]

Thank you, Ms. Dabrusin.

I just wanted to acknowledge that Mr. Morrice from Kitchener Centre has joined us.

Welcome to our committee today.

Next up we have Monsieur Simard from the Bloc for his six minutes of questioning.

Monsieur Simard, you can begin.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. DeMarco. I enjoyed your report, which I read in my bath. I have that unfortunate habit, and I had to heat my bath up twice to read your entire report.

I was struck by something in your report. You said that two‑thirds of the projects, 27 out of 40, would result in increased oil and gas production.

I'm not an expert on the oil and gas sector. However, I have a silly idea in mind for reducing emissions, namely, the need to cap production. It seems logical that increased production means increased emissions.

You said earlier that it isn't efficient to roll out these types of measures. Do you think that it's impossible to roll out a program to reduce greenhouse gas emissions without first capping production?

[Jerry V. DeMarco]

Thank you for your question, which covers both the topic of our meeting today and the topic of our meeting next week. I'll respond quickly.

In our November report entitled “Lessons Learned from Canada's Record on Climate Change,” lesson 2 focuses on emissions from the oil sector. We must set a cap to achieve our goals. Our emissions have increased over the past 30 years and we must reduce them. We need to set a cap, and we'll talk more about that next week. The cap is key to meeting the 2030 and 2050 targets.

[Mario Simard, Bloc, Jonquière, QC]

You also showed in your report, in light of very clear facts, that the program isn't helping to meet objectives. I'm thinking in particular of job retention.

Would you agree at this time that the government didn't set a clear target for the program's objectives?

[Jerry V. DeMarco]

There was a target for emissions. However, for the other components, there was only a qualitative target. To confirm value for money, for example, in terms of jobs, you need measures and targets. There weren't any for this program.

[Mario Simard, Bloc, Jonquière, QC]

You referred to the concept of addition and additionality. I'm curious whether Natural Resources Canada and perhaps the Department of the Environment have any tools for this type of work, meaning for measuring the additionality of emission reductions.

[Jerry V. DeMarco]

I don't know. You can probably ask the Natural Resources Canada officials on Wednesday when they're here.

I'll ask Sylvie Marchand whether she knows more about this than I do.

[Sylvie Marchand]

Good afternoon. Thank you for your question.

As we said in our report, the use of standards, particularly ISO 14064 standards, is very useful for this purpose. The goal is to ensure the consistency, reproducibility and additionality of estimated emissions reductions. We recommend the use of these standards, protocols or other standards based on this ISO standard. So it's very possible, yes.

[Mario Simard, Bloc, Jonquière, QC]

I see the emissions reduction fund and other government initiatives as an effort to decarbonize the oil and gas sector. To me, that's like saying we can create diet poutine. I don't advise anyone to eat poutine for diet purposes. If we want to decarbonize Canada's economy, it seems that the solution isn't to invest heavily in the oil and gas sector, but rather in renewable energy.

Do you personally believe that it would be better to invest more in renewable energy than in the oil and gas sector?

[Jerry V. DeMarco]

That's a choice for the government, not for me. It's a matter of policy.

We know that the emissions curve is heading in the wrong direction, so we need to ask questions of this nature. I would recommend that you raise this issue with the department officials on Wednesday.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. DeMarco.

[The Chair, Liberal, John Aldag]

Thank you. Unfortunately, that's the end of our time for this round.

Now we go to our final MP, Mr. Angus from the NDP, for six minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Methane is a planet killer. It is 80 times more destructive than CO2. I've spoken with people in the industry who say it is possible to deal with the leakage. What seems to be lacking right now is industry will. Given the Prime Minister's really strong statements at Paris and COP26 on Canada's commitment, this program seems to me to be a no-brainer. This should be a pretty straightforward thing, yet, when I look at how the program was set up, it was to attract investment and increase competitiveness, and then further down, oh, and deal with greenhouse gas emissions with a focus on methane.

How is it that a program that is focused on attracting investment and competitiveness is actually dealing with the climate crisis?

[Jerry V. DeMarco]

That's an excellent question, and that's why we wanted the department to look at the full picture, rather than taking a myopic view of the equipment being installed at a given site. We wanted to see what the full effect of the fund was on, for example, continued production, or increased production that wouldn't happen in the absence of the fund.

This goes to the key point of completeness in the greenhouse gas accounting principles. Without a complete picture, if we look at programs like this in a myopic way, perhaps it's of no surprise that over the last 30 years the trend in Canada is that emissions are going up, even though we have individual programs intending to diminish those emissions.

Our recommendation is to look at the full picture in creating a program, in designing and implementing a program like this, rather than looking at it in too narrow a way. The figures attributed to reductions that have been published by the department are not net emissions figures, and net emissions figures are what we need to know whether we're meeting our Paris targets.