Natural Resources Committee on Feb. 14th, 2022

[Seth Klein]

I did. What I was getting at is that the Paris Agreement, so far, doesn't even mention the words “fossil fuel”. It's only dealt with in a—

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

I knew what you were getting at. I just wanted to make sure I quoted you correctly.

I apologize for interrupting, but we are limited in time.

Do you think that's realistic to expect to be able to get a world-wide agreement in that respect? If so, can you explain how you'd do that?

[Seth Klein]

I think we would join efforts that already have that under way.

We have the Beyond Oil & Gas Alliance that the Province of Quebec has joined, and we have this international effort to create a fossil fuel non-proliferation treaty. This, in some ways, relates to the earlier discussion about border adjustments. Will we get every country initially? No.

We can treat them differently in terms of our trade policies. Those—

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Mr. Klein, while we're recognizing that reality, which you just confirmed, don't you agree with me that we have to do something to protect our own economy here in Canada, and that to take the approach you're talking about wouldn't accomplish that?

[Seth Klein]

No, I don't.

I think Canada is the fourth- and sixth-largest producer of oil and gas in the world. In the context of a global emergency, that means we have to do our bit.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

You're fully in favour of putting a cap on production. Can we just leave it at that?

[Seth Klein]

That's not what I said. I said you should stick with what's in your jurisdiction, and it should have the effect of ramping down production.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Okay. All right. I think we understand each other.

I think I know the answer to this, but only one or two of you actually said it clearly. None of the witnesses are opposed to a cap. Is that correct?

I'll take that as a confirmation that you're all in agreement.

[Seth Klein]

Yes.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Okay.

Ms. Petrunic, you mentioned that government should play a role as a convenor and as an investor. The investor aspect is what I want to follow up on.

Ms. Smith also talked about incentivizing actors in the economy. It sounds very much like the same thing.

I'm wondering if first, Ms. Petrunic, you can give us further examples of those types of investments. Perhaps Ms. Smith can add to that as well.

[Dr. Josipa Petrunic]

Yes, thank you.

I'll keep my video off just to improve the quality.

In terms of being an investor, there are two types of investment primarily. One is on the research and innovation side, and then one's on the straight-up subsidy side that nobody really likes, but at the end of the day might be necessary for a temporary period of time.

On the R and D side, a simple analogy to the oil and gas sector is AOSTRA, which, in Alberta, the government has pumped hundreds of millions of dollars into. It's academic research with industry. It develops technology. It's where SAGD came from. It allows us to pump bitumen out of the ground in ways we never knew 30 years ago.

That kind of innovation creates an industry, makes it marketable and possible.

The same thing is needed in the hydrogen battery electrification, energy storage integration. NRCan's doing a pretty good job of that already, federally. There do need to be some additional investments in green hydrogen integration with energy storage, but dotting the i's and crossing the t's, the types of projects.... The reality is, we just need to continue investing through NRCan into that sector for the research and development component.

The other side is the subsidies. I'm not a fan of subsidies. I've drunk the Kool-Aid. I drive a Tesla. I believe in electrification, but I don't believe in subsidies for individuals. I do believe in subsidies, as a technologist, for public fleets. That's because of the tax efficiency issue.

The subsidies we're talking about here are specifically to offset the differential price of green hydrogen over diesel for transit buses, where public transit is already subsidized by municipal and public users, and it's part of our social fabric. As a result of that, it's tax-efficient, in the sense that it would be a time-limited, five-year investment in a publicly subsidized, social welfare, public fleet. That is very different from general subsidies for electric car drivers or any other kind of fleet. Those subsidies would lead to the gateway opening to price parity for the private sector, freight and truckers who wouldn't need those subsidies, but would benefit from price parity in the marketplace.

Those are the two types of investments.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Thank you.

Perhaps Ms. Smith can take a run at that. We have a little extra time because of the birthday party we had.

[Merran Smith]

My colleagues said it all very well, but remember that it's not just the oil sands, but the aerospace industry and the pharmaceutical industry. These were all heavily invested in by the government and have led us to where we are today as leaders. That's what we need to do in the clean energy space.

As an example, entities like Saudi Arabia, Oman, Western Australia and the EU have invested tens of billions of dollars in hydrogen to replace natural gas by using clean hydrogen. That would be a great example.

We see the same with battery technologies, and I would agree there are investments both from ISED and NRCan that are doing well. We need to increase that if we're going to build out some of these industries.

Right now, the world's in a race. Where are we going to land some of these projects? Canada's clean electricity is our secret sauce. It's the thing that gives us an advantage. These companies want to produce things in a low-carbon way. Their brand is identified with being low carbon and Canada has a lot to offer there. We need to get out there and start doing the work, including providing some supports to bring those companies and land them here for the long term.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Thank you.

Thank you, Mr. Chair, for indulging me.

[The Chair, Liberal, John Aldag]

Now we have Monsieur Simard, who was scheduled for two and a half minutes, but our first two went slightly over, so I'm going to give him a bit of latitude if he wants to push the clock slightly. The same applies for Mr. Angus when it's his turn.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I have a quick question for Dr. Petrunic.

Canada has a hydrogen policy, but it does not distinguish between blue, green or grey hydrogen. Do you think it should make the distinction, precisely to ensure financial support goes to hydrogen projects with the lowest carbon footprint?

Did we lose Dr. Petrunic?

[Dr. Josipa Petrunic]

I am here. I believe it's the translation that leads me to lose connection.

Thank you. I heard your question.

I think I got the bulk, or most of it.

Quickly, on the vision between blue, green and grey, yes, there should be a division. The whole purpose is to reduce emissions over the life cycle of the vehicle system or transportation. Of course, green hydrogen with the lowest footprint should be privileged.

Having said that, in terms of reality of technology, there is no doubt that there's a place for grey and blue, even though it's not my preferred technology that I would put forward, even as a taxpayer. There is, nonetheless a place, for them in the first few years, in particular.

I will give you an example. In Mississauga, where we have the hydrogen fuel cell bus project we're working on right now, it is quick, easy and cheap to get grey or blue hydrogen right now, particularly grey hydrogen. It's cheaper than diesel. Is that the end goal? No. It has to get to green hydrogen and, ideally, right away. However, the reality is that you have to get the buses on the ground and you have to figure out how to run those things, you need new technologists, new driver training, etc.

There's a lot to do to learn how to operate the hydrogen fuel cell technology in a propulsion form, so one can imagine in the next five years that there will be space for grey and blue hydrogen while the vehicle systems get out the door, with green hydrogen ideally taking over.

Alberta is an example where there's a pilot project right now. That hydrogen is not green hydrogen, but it does teach the trucking fleet that's piloting it how to use hydrogen fuel cell trucks and all of the operational issues with it.

It's not a simple solution. There's a space temporarily for alternative hydrogen, but green hydrogen has to be the end goal and it has to be privileged.

[Mario Simard, Bloc, Jonquière, QC]

In response to an earlier question, you said that hydrogen technology should focus on public transit, not individual transportation.

Is that also true for heavy-duty transportation fleets?

[Dr. Josipa Petrunic]

Yes. With regard to transportation, I indicated that we should focus on public fleets, largely because public fleets scale faster than individual light-duty cars and they scale faster than private heavy-duty fleets.

For example, in transit, buses are not purchased one by one. They are purchased in units of 10, then 50 then 100. They're mass fleet procurements that allow for a stepwise function of growth.

In the heavy-duty sector, electrification and hydrogen electrification of transit buses are the gateway to coaches and trucks because they fuel at the same pressure levels and they use the same high-powered charging systems that are not transferable to the car light-duty sector.

There is a component here where if we want to get bang for our buck, the focus should always be on the heavy-duty fleet sector—public first, followed by the private freight sector. They get greater bang for their buck and greater greenhouse gas emissions reduction, and they buy en masse. They do not buy them one by one.

In comparison, with electric cars, which I'm a big believer in, you still have to convince households to make an individual economic choice. That is a much slower logarithmic growth compared to what you get in the stepwise function of fleet adoption on the heavy-duty side.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

[The Chair, Liberal, John Aldag]

Mr. Angus, it's over to you. I'm going to give you three minutes and 45 seconds as the others have had.

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

Thank you very much, Chair.

Mr. Klein, I want to follow up on my good friend and Liberal colleague's questions to you. It's clear what the Liberals are positioning here. Their focus is on protecting the domestic economy, which is heavily focused on oil production that the regulator says is going to have massive increases.

How does this Liberal focus on protecting the domestic oil industry—

[Yvonne Jones, Liberal, Labrador, NL]

I have point of order, Mr. Chair.

I can't hear Mr. Angus.

[The Chair, Liberal, John Aldag]

Okay, hold on one second. I'll stop the clock.

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

Can I start over again because my question was interrupted?