Natural Resources Committee on Feb. 7th, 2022

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

Thanks, Mr. Chair.

I really appreciate the witnesses' presentations today, and the questions.

I've always been a proponent of saying we recognize borders, but greenhouse gases don't recognize those borders. If the production cost here in Canada goes up due to whatever new regulations are imposed, I fear that countries that have a very weak environmental standard will step up to fill in the gap. You've each commented on that at some point.

Is it possible that, if Canadian oil production goes down, global greenhouse gas emissions go up due to these countries increasing their own domestic production to fill the gap? That's why I think it's important to talk about the cap on emissions, not on production. We're 1.6% or something, China is 26%, and we're sitting beside a major country in the world that has a lot of emissions, as well. There are lots of opportunities for technology development here; our companies are already doing that.

Can each of you expand on that?

[Colleen Collins]

I'd like to say that customers buy our product. That's determined by our customers; that's not determined by us. That's the way global markets work, and at the pace we're going, we're bringing down by 20% the emissions in the oil sands since 2015, and that's just the beginning.

I agree with Professor Jaccard. I don't see any reason why we can't reduce the per-barrel intensity as well as reduce the total intensity and at the same time not reduce production, or even increase it slightly.

[Dr. Sara Hastings-Simon]

In answer to your question about the risk of what I understand to be carbon leakage, if we were to reduce production of Canadian oil and that production were transferred elsewhere, as Mr. Jaccard said, there are ways to avoid doing that by reducing the emissions. But if that were to happen, it's unlikely that overall emissions would increase, because while there has been progress made to reduce the emissions from Canadian oil production and Canadian oil sands production, it does remain one of the highest emissions intensity products worldwide because of the nature of the product itself. So the emissions footprint overall from other sources that would replace it would on average be significantly lower. I'm not suggesting that is what should happen, but as to your question whether there would be a carbon leakage, I think it's unlikely.

[Dr. Mark Jaccard]

I'll just say I agree with Ms. Hastings-Simon's answer.

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

Thanks.

We have a Liberal government that's already announced that a carbon capture tax credit is going to be coming down the road shortly. Do you have any advice on how it should be designed to help meet the emissions targets and spare our Canadian innovation in the industries?

[Dr. Sara Hastings-Simon]

I have a point on that. Given that we have a carbon price within Canada, one that is planned to increase, I think it's really important that a tax credit be designed so that it does not provide a sort of unnecessary windfall to producers. If a tax credit is designed in a way that brings that higher price sooner so that producers can make investment decisions because of certainty, I think that's a good thing, but then the value of that emission reduction in the long term doesn't need to be sort of double counted. So you could do that by either basically ensuring that the environmental attributes are purchased through the design of that carbon price, or more generally to provide essentially a contract for difference or carbon pricing guarantee so that not only carbon capture and storage could take advantage of that, but all sectors and all emission production opportunities. You would have the ability to provide that certainty.

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

Thank you.

Could I have a comment from the others as well?

[Colleen Collins]

I think the big thing, the reason they're talking about incentives, is that the carbon price is paid on existing production, but the carbon capture has to be developed, designed and built today. I think that's the reason they're talking about incentives: you have to get engineers' pencils working and “think guys” building stuff now.

[Dr. Mark Jaccard]

I'll just say I'm a strong supporter of this particular policy, and the others have given the reasons.

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

There's a good example to be set for the low Canadian carbon that we can use to help save the world, I guess, if you can put it that way, but the technology that needs to be developed could well be exported.

I have a quick question on other sources here. Other than nuclear, are there any large-scale sources of energy that could theoretically replace the oil and gas energy production in Canada that is currently used to provide electricity to, say, our homes and businesses or used in the oil sands? Nuclear is one that I think of, but is there anything else?

[Dr. Mark Jaccard]

We're going to shift towards an electricity economy in many respects, and we're going to have enormous production of electricity from solar and wind, and that's going to have to be linked up with our hydro reservoirs and other energy storage and so on. There's going to be massive economic development as part of the transition to a zero-emission economy.

[The Chair, Liberal, John Aldag]

Thank you. That's the end of the time there. We're just a little bit over.

We're going to go now to Ms. Lapointe for five minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for appearing today. We are very fortunate to have you here to share your experience and knowledge with us.

My first question is for Dr. Hastings-Simon.

How can we help the oil and gas sector shift to net-zero emissions through our current industry lens while also considering what the sector might look like and what it might need in 10 to 15 years?

[Dr. Sara Hastings-Simon]

I think providing long-term certainty is critical in both policies and things like the price of carbon, for example. Finding ways to provide certainty will allow companies to make investments in technologies that reduce emissions, on the back of knowing the ultimate value of those technologies. I think that's one of the most important things that can be done. As I mentioned, I think there are also certainly non-price barriers to the deployment of technology. When it comes to things like methane emissions, more direct regulations around the use of different equipment that can reduce methane emissions, for example, is very helpful in enabling those emission reductions to happen.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

My next question is for Mr. Jaccard.

I was fascinated to hear you say that we currently have the technology available to produce at net-zero emissions levels. What would you say we need to do from a policy and legislative perspective to get us there?

[Dr. Mark Jaccard]

Well, it's the same as 20 years ago, and we only have two options. There are only two kinds of policies that actually overcome the fact that you shouldn't use the atmosphere as a free waste receptacle—putting a price on carbon or regulating the carbon emissions or the technologies. We're doing a mix of these, and Ms. Hastings-Simon talked about that.

She mentioned that it's good to try to get some price certainty, so there's your rising carbon price, which we have in Canada, whether it's the output-based pricing system for industry or the pricing system for consumers. That's price certainly for investors, but the emissions cap is another way of having that certainty. The trading of permits under that cap might create some price uncertainty.

In energy environment economics, we talk about this trade-off between giving investors some price certainty or some emissions certainty. Each one has its own trade-offs. The policies are really simple. Don't let anybody fool you that there are a whole bunch of tricky policies out there. That's all it is, and we have those policies. They need to be more stringent.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Dr. Hastings-Simon, what would be your response? Would you have anything to add to that question that I just asked?

[Dr. Sara Hastings-Simon]

The certainty we would like to create from an increasing carbon price, I think, is not certain enough to be “bankable” or “financeable” for investors. I think that when industry is going to financial institutions to get loans or equity on the back of a rising carbon price, that is not certain enough. There are things that government could do to provide more of a guarantee to lower the costs of financing there.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Ms. Collins, there is an incredible potential for indigenous businesses and leaders in the energy sector. I would want to know what we can do now as a government to ensure that those opportunities are there for strong indigenous partnerships.

[Colleen Collins]

I think we have increasingly developed financial pathways, financial regulation. The equity participation and equity partnerships that we're seeing right now are a huge step forward. Again, clarity around how we count things, what counts and how it's counted, I think, will also go a long way in helping make those opportunities bankable. Anything we can do to improve that, I think, would go a long way. It really does go to transparency of information.

I disagree with Dr. Jaccard about the quality of the models. We have great models, my concerns is they're just not very transparent. I think that will also go a long way to help reduce uncertainty in the whole sector for everyone, including indigenous investors.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Mr. Jaccard, given that Canada is currently a major exporter of oil and gas, what can be done if the global demand for product reduces as net-zero economies proceed?

[Dr. Mark Jaccard]

We've seen this so many times. It happens all the time, but at least these sectors will go down very slowly, so, for workers, a transition may not be as harsh as people try to portray it.

[The Chair, Liberal, John Aldag]

Great. Thank you.

We're now going to go over to Monsieur Simard. These next two are slightly shorter, so two-and-a-half minutes.

Mr. Simard, you have two minutes and 30 seconds.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Jaccard, I don't want to end on a sour note. I was a bit hard on you.

I want to address one of your earlier comments when you said that this wasn't about waging war on Alberta. I also want to reassure my colleague, Ms. Rempel Garner, that I don't want to wage war on Alberta. For me, it's a matter of fairness. I'll tell you why.

One of the first principles of economics is scarcity. We know that resources are limited. At least, I believe that the government's resources are limited. You gave the example earlier of the aluminum sector. It's a key sector in my area, so I know quite a bit about it. There's the inert anode technology, which will produce net‑zero aluminum. Since 2018, this technology has received about $60 million in federal funding. To me, that's peanuts, if I consider that the oil and gas sector brings in about $24 billion year in and year out. When I talk about fairness, that's what I mean.

The sectors that could play a leading role in the fight against climate change are unfortunately not supported by the government. A considerable, even excessive, portion of our resources goes to the oil and gas sector.

I don't know whether you have ever done this type of reflection process. I'm thinking in particular of the forestry sector, which can replace certain products. With lignin, you can replace products from the oil industry. However, the costs are enormous, so the government will never want to embark on this. A biorefinery is a $2 billion project. The federal government currently prefers to invest in carbon capture strategies. We mustn't forget that.

I want to hear your thoughts on this.

[Dr. Mark Jaccard]

I'm not in a position to discuss or dispute the figures that you provided. That said, I've done a great deal of modelling work for governments and for industries. In my view, there's some equality.