Natural Resources Committee on June 1st, 2022

[Keith Currie, Vice-President, Canadian Federation of Agriculture]

Great, thank you, Mr. Chair, and good afternoon, everyone. Thanks for letting me take part in this.

As mentioned, I am Keith Currie, the first vice-president of the Canadian Federation of Agriculture, which I will refer to as CFA going forward.

We are Canada's largest general farm organization; we represent, roughly, 200,000 farmers and farm families from coast to coast to coast here in Canada. I'll also mention that Frank Annau, who is our environment and science policy director, is joining me today and is going to answer all the really tough questions.

We appreciate this opportunity to present to the House of Commons Standing Committee on Natural Resources. Creating a fair and equitable and energy transformation is critically important to Canadian agricultural producers. As you may be aware, the producers I represent are price-takers in the market, which means that when we incur increasing input costs, such as rising energy costs, we cannot increase the price of the products we produce to offset those rising costs. In a report that came out last December on the energy sector and agriculture, the Parliamentary Budget Officer noted that in 2019, half of all farms were either losing money or barely profitable.

We must ensure that the financial burden of a just energy transformation doesn't fall solely on the shoulders of these producers. This will require some support to invest in the technology needed to make this transformation on farms. Unfortunately, as we all know, Russia's invasion of Ukraine has caused skyrocketing input costs for gasoline and diesel along with many other products, which will likely continue into the foreseeable future. This is reducing the cash available to farmers to make such investments.

To increase this cash influx, we recommend an extension of the federal carbon price exemptions to cover natural gas and propane. These are fuels used for grain drying and livestock cooling and heating, and they are also critical activities for mitigating climate impacts, such as extreme autumn rainfall occurrences and our summer heat domes.

While the carbon price is meant to incentivize energy transformation to lower emission fuels, current fuel prices are high enough to really eclipse that as a market signal. Producers can, instead, use that money to reduce the impact of high fuel prices by adopting clean technology wherever feasible. A perfect example is precision agricultural technology, which significantly improves fuel efficiency by using fleet analytics and auto-guidance systems to reduce the number of passes needed for cropping.

One U.S. study recently found that this can decrease fuel by up to six per cent, which would be the equivalent of about 18,000 flights. That very same study also stated that this fuel use could decrease further 16% with broader adoption of such technology.

However, we face a number of barriers to this adoption, including the lack of reliable rural Internet needed to run the equipment and the fact that adoption rates drop significantly on farms that are under 500 acres in size or that have a smaller annual income of under $75,000 per year.

We recommend that the government prioritize rural Internet and scaling down this technology in order to realize these fuel efficiencies.

It's also important that we enhance existing mechanisms to support uptake of these technologies. An example that is greatly appreciated by our producers is the agricultural clean technology program, which offers a 50% federal cost share for the purchase and installation of clean tech on the farm. However, the value of eligible projects starts at $50,0000, which means that farmers need to put up a minimum of $25,000 in order to receive funding. Our concern is that this leaves out a large number of small family farms who are unable to contribute that minimum amount but are in need of being, and wanting to be, part of that energy transformation.

We recommend that this cost share be enhanced to accommodate these low-income farms and that the government reduce the $50,000 minimum project value to accommodate a greater number of low-cost projects, which will multiply the cumulative effect.

Once farms have made this transformation, we must ensure that they do not continue to shoulder the burden of energy transformation financially. This is needed on farms in provinces under the federal carbon price where fossil fuel powered electricity grids pass on carbon costs to our producers. The irony is that producers who adopt electricity to reduce their carbon costs instead pay a price on carbon passed down through their energy providers on their electric bill. These costs will only rise as fuel suppliers face pressure to meet Canada's 2030 methane reduction goals and the upcoming clean fuel standard, the latter of which it is confirmed will increase fuel prices in rural areas where there are fewer low-emission alternatives. Again, this is yet another reason to ensure that the price exemptions on farm fuels are extended to include the full range of farm fuels.

Finally, a just energy transformation on farms is only possible if we identify any inequalities.

I would like to mention that Canadian agricultural producers are looking to partner with the federal government on initiatives, going forward.

Thank you.

[The Chair, Liberal, John Aldag]

Thank you so much.

Mr. London, if you're ready, we will go to you for your five-minute opening statement.

[Ian London, Executive Director, Canadian Critical Minerals and Materials Alliance]

Thank you very much.

Mr. Chair and members of the committee, thank you for the invite today.

I speak on a subject very different from the agriculture or oil industry. Despite Canada's vast resource wealth, our critical materials remain largely undeveloped and not strategically leveraged, primarily because of a lack of understanding about their significant climate, national security, broad economic and local community benefits.

Critical materials development and their downstream processing feed major value-creating clean technologies and next-generation jobs. Critically needed materials are fundamental to clean energy production, utilization—we always talk about production, but not utilization or “Can we use less energy?”—e-mobility, communications and medical applications. The industry strategy council, a forum assembled by ISED, created a blueprint for such implementation and provides a road map of how we can get there.

This potential is impossible to capture unless there is a just transition. We all benefit by workers, communities, employers, and government officials advocating for their own interests and fully participating in the planning process. Canada's partners can achieve these aspirations if they adhere to these principles. In the EU, for example, dedicated funding streams, strong public sector attention, and partnering with non-governmental organizations and unions are instrumental to this transition. The EU's just transition mechanism is a key tool to ensure the transition toward climate-neutral economies happens in a fair way, leaving no one behind.

C2M2A, the organization I represent, has proposed a suite of recommendations around critical materials policy, investment, research and development, secondary sources, education and trade through the years. With my limited time today, I'm going to touch on a couple of just transition-related thoughts.

First, enable first nation inclusion in value-added infrastructure investment through major project coalitions, essentially. This participation should not necessarily be limited to resource development or mining projects, because, as I'm describing today, it's not a mining initiative. It's industrialization for the new economy, and allowing first nations to participate in some of its interconnecting or interdependent links along that supply chain...to the mine, and possibly into its downstream processing. A program for indigenous groups to purchase equity in critical minerals and materials projects, possibly through soft loans repaid from indigenous groups' share of the profits, should be considered.

Many indigenous groups understand the strategic nature of critical materials. However, there needs to be a clear pathway for these groups to benefit by participating in, rather than opposing, these opportunities. I fully respect the very delicate balance in this.

Second, I have worked with communities in developing projects that help address energy poverty and invest in new decarbonization technologies. Cleaner energy for cleaner mining of critical materials and a cleaner economy is also of growing interest to our customers, funders and shareholders. Energy-efficient vehicles and motors, and even Zooming, as we're doing today, are all based on high technologies built upon critical materials.

Third, there was a previous discussion, which I appreciate sitting in on, about education. We need to cultivate and prepare a workforce to fully participate in a low-carbon economy. We are clearly short of capabilities—different capabilities. Mechanics who used to work on certain motors, engines and vehicles will have to become electronics engineers or technicians. We need to consider that in our planning. It's more than just mining. Rest assured, we're short, and it takes time to build that capability. Unfortunately, the world's competitive environment doesn't allow us a lot of time.

Fourth, I have a little aside related to just economy: How do we champion research and policies that increase Canadian firms' and communities' ability to accelerate supply chains built on secondary sources? We always tend to go back to “We need new mines.” There are already materials in tailings ponds and effluent streams, in current operations by major firms, that can be tapped and start producing what was waste product into valued products. This would not detract from the benefits that can be accrued by establishing new mines, but rather demonstrate Canada's ability to capture market share and attract value-creating investment in Canada.

Fairness and solidarity must be defining principles in our critical minerals strategies and plans. We also need to complement just transition principles with the right actions and policies. Canada's mineral wealth, mining and metallurgical reputation, as well as its climate and justice aspirations, are held in high esteem internationally.

Canada can capture across-society benefits from its natural resources. I caution again that we must avoid the traditional trap of exporting domestic raw materials to be processed elsewhere, only to be imported with their larger carbon footprint as value-added finished products.

Thank you.

[The Chair, Liberal, John Aldag]

That's great. Thank you.

We'll go to Mr. Samray for his opening statement. Mr. Samray, I understand you can only stay until 6:30.

[Jean-François Samray, President and Chief Executive Officer, Quebec Forest Industry Council]

Mr. Chair, I've managed my schedule for the committee. It's no problem. I'll be with you until midnight, if you want.

[The Chair, Liberal, John Aldag]

That's very kind of you. I'm glad you're able to join us.

I was going to say, and I'll mention it now, that if anything comes up from the conversation we have today or if you have any additional thoughts, you are all invited to submit an additional brief of up to 10 pages. I wanted to mention that in case you needed to leave, but I'm glad you can join us.

If you're ready to go, I'll turn the floor over to you for your five-minute opening statement.

[Jean-François Samray]

Thank you, Mr. Chair.

I will do my opening statement in French. Feel free to ask me questions in English.

My name is Jean‑François Samray, and I am here as president and chief executive officer of the Quebec Forest Industry Council, or QFIC.

I am pleased to respond to your invitation to contribute to your thinking on the topic of a just and equitable transition in the energy sector in Canada. The QFIC is the main voice of the forest industry in Quebec. It represents the interests of softwood and hardwood sawmills, veneer mills, pulp and paper mills, cardboard and panel mills, and engineered wood manufacturers. Increasingly, it represents companies moving into bioenergy production.

Through its expertise and that of its partners, the QFIC guides and supports its members on issues that include forestry, supply, energy transition, product quality recognition, human resources and worker training, health and safety, and legal and economic intelligence.

With respect to our contribution to the Canadian and Quebec economies, it is important to remind committee members that forests and the forest industry play an important role in the Canadian economy. The sector provides direct employment to more than 200,000 Canadians in 600 communities, including more than 12,000 first nations workers, and generates more than $80 billion in revenue annually. Specifically in Quebec, the forest industry generates 130,000 direct and indirect jobs and over $25 billion in sales.

In addition to making significant contributions to the economies of hundreds of regions from coast to coast, the forestry sector is a major contributor to the Canadian economy with contributions to gross domestic product, or GDP, of more than $20 billion, or 8% of Canada's manufacturing sector. With exports worth over $45 billion in 2021, the sector has a strong positive trade balance of over $30 billion. Of this, approximately $10 billion comes from Quebec.

Beyond the economic aspect, I want to emphasize that the forest is a powerful tool in the fight against climate change. Acting as a gigantic CO₂ capture reservoir, the forest allows us to fight global warming. There is a need to maximize the sustainable use and management of our forest to enhance its carbon capture and sequestration role not only by intensifying forest management, but also by promoting the use of wood in the substitution of carbon-intensive products in the construction sector to store this carbon in the long term.

This position is entirely consistent with the solutions proposed by the Intergovernmental Panel on Climate Change, or IPCC. In particular, the IPCC urges states to act on four fronts simultaneously.

The first is the substitution of fossil fuels with renewable energy.

The second is the sustainable management of forests and the maintenance of biodiversity.

The third is afforestation, i.e., the return to production of harvested or formerly cleared forest areas converted to other uses.

The fourth is the increased use of wood as a building material.

In all of these sectors, the forest industry can play a structuring role and offer good jobs to Canadians who are looking for them or who wish to pursue their career in a sector economically linked to the energy transition. In Quebec, the forestry industry offers quality, well-paid jobs. In 2021, workers in the industry earned an average annual compensation of $68,000, more than 50% of the average Quebec salary.

Given all this, what can the Government of Canada do?

First, it can use its power to set an example by promoting and requiring products with lower carbon intensity in its own calls for tender. One example is the increased use of wood in the construction of government buildings. Every tonne of cement or steel that is replaced by a wood material significantly reduces the carbon footprint.

Secondly, it can put in place financial incentives to encourage the use of low carbon materials, such as wood, to accelerate the decarbonization of the construction sector and achieve carbon neutrality of buildings.

Third, with financial support from Natural Resources Canada, the Quebec government and the Canadian Wood Council, we have developed, under the leadership of Cecobois, the Gestimat software. This is a tool used to measure the carbon footprint of a wood building and compare the result to that obtained using the traditional method.

Like the governments of Quebec and Ontario, the Government of Canada would benefit from adopting this tool to quantify the greenhouse gas emissions found in the management of its building stock.

As Canada recovers from a global pandemic, we believe the forestry sector is the best way to maintain and create jobs and attract more investment. The sector also has the potential to position itself as a leader in the shared transition to a low-carbon economy.

Mr. Chair, I will stop here. I think you understand that it will be a pleasure to answer your questions and to show that the forest industry is a partner with the government in Canada's energy and economic transition.

[The Chair, Liberal, John Aldag]

Thank you, Mr. Samray.

For the final opening statement, we'll go to Branden Leslie, who's joining us in person in the room.

It's good to see you. If you're ready to go, the floor is yours.

[Branden Leslie, Manager, Policy and Government Relations, Grain Growers of Canada]

It's a pleasure to be here. Good afternoon Mr. Chair and honourable members.

My name is Branden Leslie and I'm the manager of policy and government relations with the Grain Growers of Canada.

Canada's grain sector is both a major user and producer of energy such as biofuels. The just transition will directly impact farmers and their operations, so we appreciate being able to share our perspectives with you here today.

Farmers are proud of their stewardship of the land, of their ever-improving record of sustainability, and of the fact that they feed millions of people here at home and around the world. Farmers must be at the table when it comes to charting our nation's path to net zero by 2050, which is why we remain frustrated by the fact that agriculture is not represented on the net-zero advisory body.

As part of Canadian grain farmers' ongoing leadership as environmental stewards, we continue to look forward to ensuring our competitiveness and our environmental and economic sustainability. We require the federal government to understand and enact policies to support, not hinder, those objectives.

That's why on March 28 we were proud to launch the development of our Road to 2050 climate solutions initiative, which is intended to guide government policies and programming directed at Canada's grain sector, ensuring farmers are supported in their efforts to reduce emissions and increase carbon sequestration.

In the meantime, however, I would like to outline some realities of energy use requirements for our sector and how best we can mitigate the impacts of climate change while remaining competitive as we work to feed a growing world population.

Mr. Chair, Canadian agricultural energy demand increased from roughly 200 petajoules in 1990 to roughly 300 petajoules by 2016. While this might sound concerning, a more important fact is that the amount of energy consumed per dollar of agricultural output fell by 17%. This is sustainable intensification of production. This is what we should ultimately be working towards—maximizing our production in a sustainable manner.

At a time when the world is facing a looming threat of food insecurity, Canadian farmers are being asked to grow more. They are facing policies that could limit their production, such as the reduction in fertilizer use. Prices for inputs such as crop protection products and fertilizer have dramatically increased recently, further reducing already very thin margins for farmers.

It's important to note that farmers are ultimately price takers and cannot pass on additional costs as many other businesses are able to do. These crop inputs are some of the highest expenses for grain farmers, so they are utilized as efficiently as possible, but they must not be constrained in their use by government policy. I can assure you that farmers are not spending tens or hundreds of thousands of dollars extra on inputs like fertilizer just for the fun of it.

Mr. Chair, farmers are adopting the use of renewable energy where possible. The number of farms using renewable energy sources more than doubled from 2016 to 2021. However, the reality is that our farm equipment and transportation system mainly runs on diesel. Our grain dryers run on propane or natural gas. Our crop inputs require fossil fuels to be manufactured. Progress is being made towards moving to alternative fuel sources for all of these, but the reality is that they are not currently available. Realistically, given the cost of new machinery and a host of other challenging issues, it will take years, if not decades, before they are scalable.

In the meantime, a just transition must ensure that the cost of producing the food we all eat does not rise dramatically. That can only be the case if the family farm in Canada is profitable. Extra costs added to the fuels that farmers have no choice but use simply isn't a viable option.

Farmers are innovative by nature and embrace the newest technologies. From beneficial management practices to the newest plant genetics or precision agricultural technologies and more efficient machinery, farmers have and will continue to invest in things that are good for their bottom line, their soil and the future of their operation. They can only make those investments, however, if they have the capital to do so.

Canadian farms have tremendous potential to sequester even more carbon in the years ahead and will continue to work to reduce emissions. However, if our nation wants to ensure our food security, farmers will require the use of fossil fuels in the short term.

If Canada is to consider what a just transition to a low-carbon economy looks like, I would ask that you take into account these realities for farmers. We must ensure that our farms are able to be sustainable now and into the future, both economically and environmentally. It is critical that government policy reflects these current realities so that Canadian farmers can continue to feed our nation and the world.

Thank you, Mr. Chair. I look forward to your questions.

[The Chair, Liberal, John Aldag]

Perfect. Thank you for a nice, tight opening statement.

Folks, looking at the time, we'll probably get through one round of six minute of questions for each party. Then we had planned to go in camera for a brief discussion on drafting instructions.

I have the subcommittee scheduled following this meeting. Some questions were raised on Monday about the study. We're going to deal with that in the subcommittee following this.

We'll go through the four six-minute rounds of questions, at which point we'll be able to thank our witnesses and then we'll go in camera. For what lays ahead for the remainder of this session, we're going to start with Mr. Maguire.

I'll turn the floor over to you for your six minutes of questions.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thanks, Mr. Chair.

I want to thank all of our presenters today for their presentations.

I'll be focusing my questions—and I thought we were going to be getting a few minutes for some of my colleagues here as well on the agriculture side with Mr. Currie here and his colleagues and with Mr. Leslie.

You've both indicated that the industry is price-takers. I come from a farming background and I know that, but I wonder if you could expand on how this just transition has impacted a lot of the rural communities.

Mr. Currie and Mr. Leslie, you made some comments. I'd like you to expand on some of the ones about the investment in technology. The status quo has never been acceptable—I wrote that down here—to stay ahead in food production here domestically and for export. What precipitated my writing that down was your comment about how the industry has been leading in technology to provide the food we are going to need in the future as well. What do you specifically recommend to our committee to ensure that these farmers and our rural communities won't be negatively impacted by the just transition?

Mr. Currie, maybe you could start.

[Keith Currie]

Thank you, Mr. Maguire, for the question.

I think what we need to keep in mind is that agricultural producers in rural Canada by and large pay disproportionately more when it comes to pretty much everything but especially when we're talking about carbon pricing. As an example for those of you in urban ridings, when you want to go to the grocery store, you have a couple options when you go out the door—you jump in your car and choose to pay fuel tax on your drive there and back, or you go down the street to catch a bus or streetcar or whatever. We don't have that opportunity in rural Canada. Everything we do—and I know MP Angus will understand with his vast riding—requires us to travel long distances to do regular business, so we are paying disproportionately more.

We're still willing to do our part, so we need those financial incentives to figure out how we can do more online, for example, and how we can minimize our fuel use through technology, which is going to require expansion of broadband and 5G and, certainly, getting telecos that are sitting on unused spectrum to give it up because they didn't pay for it and they're not using it. That will increase the speed of broadband expansion throughout Canada, which is greatly needed for our production increases that are required and for efficiencies within livestock buildings, etc. As you heard, we are willing to do our part, but it's going to take that investment. When we make a decision in our operation to do more to sequester carbon, we don't do that environmental practice in isolation. There are also multiple co-benefits like nutrient retention, water flow increasing, biodiversity increasing. We increase the wildlife, pollinators, birds, etc. There are multiple environmental co-benefits with those investments; they're not just singular investments. We as farmers are willing to do our part, but we just can't bear the financial burden on our own backs; we need that help from government.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Mr. Currie, because of time, I'll interject there. I know you mentioned the carbon pricing exemptions as well for drying and heating, and the $50,000 level for farm families, which is important as well.

Mr. Leslie, you wanted to answer that as well, but I'll throw in another one here on the concerns about energy and food security around the world. We've seen with the war in Ukraine right now that farmers are being asked to grow more food here to feed the world. Do you recommend we take into consideration the dramatic rise in energy costs—you've already talked about that a little bit—and food security issues in our committee's report? If so, why should we do that? I personally think we should, but can you expand on that situation given that Ukraine and Russia, which are both big food producers, may not be able to do that this year to their fullest? We also still have drought situations in spite of Manitoba being under water right now. There are still pretty dry regions in some of the midwest. Please expand on that, Mr. Leslie.

[Branden Leslie]

Sure. Thank you, Mr. Maguire.

There are a few things to touch on. I would certainly recommend it. The connection between food security and a just transition might not seem to be obviously connected, but I think it's very evident that they are. The average price of diesel on a farm in whatever province has largely doubled, it's a significant cost increase, and as mentioned, we can't pass those costs down.

I appreciate Mr. Currie's mentioning of the carbon tax exemption in Bill C-234. That policy is simply taking money out of the pockets of farmers when they go to dry their grain. You have to store your grain at a certain moisture level or it will rot. You will no longer have a product in your bin, and you will have something to throw away. That money is better invested in the new technologies and things like precision agriculture, applying the precise amount of inputs with less application, great, but they're very expensive, but you'd be buying a $600,000 piece of equipment at a time when a lot of farms are lucky to be breaking even.

Last year across much of the Prairies, there was a drought. As you mentioned, this year in southern Alberta and parts of Saskatchewan there's serious drought, and in Manitoba, where I'm from, it's largely under water. It is a challenging time, so I would absolutely recommend considering using that food security lens to be considered as we look to the just transition. It's one thing to aim for this, and I think when we look towards perhaps the electrification of a tractor down the road, that would be a great thing, but there are some substantial changes that—

[Larry Maguire, Conservative, Brandon—Souris, MB]

Just quickly, then, I'm going to have to interject because I'm almost out of time. On this fertilizer reduction that the Liberal government wants to bring in with it, can you outline to our committee the impact it will have on crop production and food prices? Maybe you two gentlemen could just give a quick reply to that.

[The Chair, Liberal, John Aldag]

I would say the reply has to be quick, because we're at six minutes, and we're going to run out of time. Maybe one of you can give a two-sentence response.

[Branden Leslie]

With less fertilizer application we will grow less food. Less food means increased prices.

[The Chair, Liberal, John Aldag]

Perfect. Thank you.

We're going to now go to Ms. Dabrusin, who will have her six minutes.

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

Thank you, Mr. Chair.

I will address Mr. Samray first.

Mr. Samray, I find the discussions very interesting. In my city of Toronto, wood is being used more and more in the construction of buildings. You talked about the jobs that are being created as a result of the increase in the number of construction projects where wood is being used.

Have you done any analysis on what kind of jobs these are? What opportunities does this represent?

[Jean-François Samray]

The chair has allowed me to send you a 10‑page document. I am pleased to provide you with my comments on this.

The construction industry also wants to be able to use more workers. There is a balance here. More and more commercial builders are looking for prefabricated modules, i.e., glulam beams.

These are large sections that are installed using cranes, which allows buildings to be erected much more quickly. The work in this case can be done in a factory, and it requires special skills in both manufacturing and robotics. This represents solutions for the construction sector.

In short, it is about promoting the prefabrication sector, as there is a lack of workers on construction sites.

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

Do you know in which regions these prefabrication plants are located, now that there is starting to be more work in this area?

[Jean-François Samray]

There are some in Quebec, for example at the Chibougamau plants, which are in a way our engine. The company Nordic Structures also makes them. There are other manufacturers in Quebec, as well as in Ontario and British Columbia. These technologies are gradually developing.

At the Canadian Wood Council, a working group is focusing on this. There is growing interest in developing this type of construction, including in the Maritimes. There is indeed a need, as there is a shortage of labour to establish yards that use raw wood.

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

Thank you very much.

My next questions were actually for Mr. London. You were talking about the critical materials, and the big focus was on the jobs in processing, not just on the mining side of things. I was interested by that. Have you done an analysis as to where the jobs in processing could end up being? What would be some of the regions where you would expect to see many of these jobs developed?

[Ian London]

Thank you for the question.

You're bang on. You can look at northern Quebec, as some of these processing facilities are energy-intensive, so we would want clean power. You see initiatives by Rio Tinto for scandium light- weight materials for vehicles. In some of the cases we would have to look at southern Ontario. Thunder Bay has large lithium...that can be produced tied in with the battery manufacturing in central Ontario. You look at Saskatchewan. The Northwest Territories' rare earths are feeding into the Saskatchewan Research Council, which is building separation facilities. There is actually a pan-Canadian solution out east, and there are Labrador-Newfoundland resources there also. They are very different materials. There is a suite of materials that go into any of this electric farm equipment.

How do we reduce demand in terms of energy? That would be by electrifying equipment, which require pan-Canadian solutions—southern Ontario, Quebec, and out west.

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

Thank you so much. That was a really fulsome answer. I am going to hand my last two minutes to my colleague Mr. Sorbara.