Natural Resources Committee on Sept. 18th, 2023

[The Chair, Liberal, John Aldag]

That's good timing. It's the end of the five minutes.

We'll now go to Mr. Sorbara for the final five minutes of this round.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair. It's great to see you again.

Welcome to all of my colleagues and to the witnesses.

I'd like to go to Mr. Moffet.

In the last paragraph of your remarks, you reference budget 2023's commitment to improve the efficiency of the federal impact assessment and permitting process for major projects in Canada, which I think is critical for us on the EV supply chain—just to give you an example—or even to move online with further nuclear projects in the province of Ontario and the ones that were announced. I'm not going to go into too much detail there because that would take a long time.

Europe and the United States have both made announcements within, I would say, the last six months to a year on speeding up the processes with regard to permitting, on both the renewable front and the non-renewable front.

Can you give some indication on the $1 billion that we put into the budget to make sure the Impact Assessment Agency is even more effective than it currently is today?

[John Moffet]

I can speak to that very briefly, but I'll start by saying that the commitment is not about the Impact Assessment Agency, nor is the commitment about the Impact Assessment Act. The commitment is about permitting. In fact, the majority of projects in Canada, the majority of the investments that we've talked about today, don't go through the impact assessment regime. The Impact Assessment Act has nothing to do with the majority of projects.

However, most projects in Canada are subject to a variety of federal and provincial regulatory requirements and permitting requirements, so the commitment is to try to align and expedite decision-making across that full suite of regulatory and permitting requirements. The focus on the Impact Assessment Act is, in fact, a red herring.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

First of all, thank you for that clarification. I was hoping you would bring that out.

Second, with regard to what's happening today in North America—and when I define North America, obviously, I mean our largest trading partner and a very large trading partner in Mexico—we have seen a transition going on. At the same time, recently a very successful, very large Canadian energy company, Enbridge Inc., purchased three natural gas companies in the United States—about a $10-billion capital investment, done very successfully through the markets. There's an equity raise and bond financing that accompanied that, which I was reading about over the last few days. It is a North American energy market.

I would like to hear, specifically on natural gas, how our trading partners are viewing that energy source where we had a leading North American, Canadian-based company increase its presence within that sector. Thank you.

You were nodding, Mr. Des Rosiers.

[Frank Des Rosiers]

I'll give it a shot.

You can feel free to add, John.

I totally agree that, when we think energy, we have to think.... The motion and the study that you're launching now very much takes that perspective. Taking a North American energy perspective is really the way to look at it, and it's especially true in the case of natural gas, where we see those networks and pipelines being deeply integrated. I would add to this that they've become even more global now thanks to LNG facilities. Canada will be having its own facilities out west where, certainly, the connection on the west coast for Canada with the Asian market or with the U.S. market, where much of the gas is channelled through our infrastructure assets and goes to Europe and beyond.... That kind of connection is now spanning not just the continent but beyond.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

My final comment is on this two-track trajectory—which is what I call it—where we are seeing substantial investments in the clean energy transition. We see that here in the province of Ontario with announcements on SMRs. With that, there is an energy tax credit—I forget the name—that we provided within budget 2023 and that I applaud significantly. At the same time, there is further growth in the renewable assets, be they solar, wind and so forth, and you're seeing that across the pond.

Right now, my understanding is that 84% of the Canadian electricity grid is clean energy. Is that correct?

[John Moffet]

Yes, it's over 80%.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

By your estimates, what would be the requirement in terms of how large our electricity grid would have to become to meet the increasing demands of the transition to clean electricity products, including EVs?

[John Moffet]

I can start.

I think the honest answer is that nobody knows exactly, but we know that demand for electricity is going to increase significantly. My colleague referred to an estimate of the demand doubling. The recent regulatory impact analysis statement that we issued for the clean electricity regulations had a couple of scenarios. One was 1.5 times growth; another was for larger growth. We see estimates from credible third parties ranging from 1.5 times to three times growth.

The answer is that there will be very significant growth across all forms of clean energy over the next few decades—a large lift, as my colleague explained in his opening remarks.

[The Chair, Liberal, John Aldag]

We're going to have to end there. That's just over the five-minute mark.

Colleagues, we're at 5:30. We do have some committee business we need to get to. We're slightly ahead of where we wanted to be. I could squeeze out four two-and-a-half-minute rounds. Do you want to do that?

Okay. We'll go first then to Mr. Patzer for two and a half minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I'm going to let Shannon take the questions.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thanks, Chair. If I still have time, I'll throw it back over to Jeremy.

Given the conversations we're having about the requirements to reduce emissions and the competitiveness issues between the U.S. and Canada, I want to mention the importance of the discussion around investment versus production tax credits and the way that governments incent emissions reductions in the U.S.

They have a method that offers a guaranteed price for actual, proven emissions reductions. For Canadians, for the committee members, it would behoove Canadian policy-makers to look at that model versus Canada's, in which layers of different kinds of carbon taxes have simply served to increase the cost of living and to make fuel and food unaffordable, without, it would seem, any relationship whatsoever to actual emissions reductions. That is a topic that I hope this committee will be able to explore with American representatives and others as we go forward.

I do want to ask a question about the SIF program. I understand, of course, the importance of Canada's owning the supply chain in critical mineral production, leading to meeting electrification goals. That's a very high priority that Canadians should address, but I have a question about Woodfibre LNG. That's a groundbreaking project. It will be net zero by 2030. It has an indigenous partner as an environmental regulator. It will be run on renewable electricity by 2027. The application was made to the advancing net zero and indigenous reconciliation part of the fund. It's mind-boggling that it was rejected. Can someone explain why?

[Patrick Hum]

I think it would be important that we have a conversation with the company. It's important that we have a conversation to explain where the priorities are for the program and maybe to speak to them about how decisions were made to issue that rejection letter.

[The Chair, Liberal, John Aldag]

That's the end of the two and a half minutes.

We'll go now to Ms. Dabrusin who will also have two and a half minutes on the clock.

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

Thank you so much.

My question's really about how Canada can seize the opportunities that are presented by what we see as a worldwide transition to low-carbon products.

I believe it was in your statement, Mr. Des Rosiers, that you mentioned the EU showing a preference for lower-emission products and how they're prioritizing collaboration that drives energy transition and security. Maybe I'll start with you, but anyone else can jump in on that.

What is the EU doing, and how do we make sure that we are seizing those opportunities as we go forward?

[Frank Des Rosiers]

I couldn't agree more that opportunities abound. I was at our missions just recently. We heard from our ambassadors in Japan, South Korea, the U.S., Germany, Spain and France. They were all saying how keen those partners are to secure their supply from Canada and our firms. This is one of those rare moments when you have governments and firms alike very much converging because they know that their clients are expecting low carbon to be embedded. When they do make those investment decisions on those billions of dollars of assets, they're very diligent about looking at all stages—from transportation to production to transformation—as to how Canada stacks up in this regard.

All in all, thanks to our clean electricity, thanks to many of the things that play in our favour, we actually stack up quite well. That's part of the reason we have seen so many deals happening lately.

[John Moffet]

Can I just elaborate on one point?

Another thing the European Union is doing, of course, is standing up a CBAM, a carbon border adjustment measure. Canada, as in so many areas, is well placed to address that because of our robust system of carbon pricing and regulations.

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

I have only 30 more seconds. On carbon border adjustments, if we do not do what we need to do to transition to a low-carbon economy, what would be the impact of the EU border carbon adjustments on our trade with the EU?

[John Moffet]

The CBAM would effectively impose a tariff on any imported products that are not low carbon.

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

Thank you so much.

[The Chair, Liberal, John Aldag]

That's the end of that round.

I will go to Mr. Simard, who will have two and a half minutes on his clock.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I'm very fond of my friend Mr. Dreeshen, as well as Ms. Stubbs, but I would like to come back to something. When it comes to energy transition, there is a first principle: carbon pricing. It must be clearly understood that there are not multiple carbon taxes, but only one, and that doesn't apply to Quebec, which has its own carbon pricing. The other things that are being added are fuel regulations, and I would point out that the Conservative Party has also already introduced fuel regulations. So we can't talk about multiple carbon taxes, because that would be untrue.

I have a quick question for you, Mr. Jovanovic. In your presentation, you said that the clean hydrogen tax credit would vary based on carbon intensity. The minister has often told me that he doesn't want to talk about the colour of hydrogen, be it blue, green or grey, but do you already have tiers to distinguish between hydrogen produced by hydroelectricity and hydrogen produced by oil and gas?

[Miodrag Jovanovic]

Yes, the government has announced three levels of credit. For the cleanest hydrogen, there is a 40% credit. Then there's a 25% credit at the intermediate level. Then it drops down to 15%. To qualify for the 15% credit, for example, I believe the hydrogen produced has to have a carbon intensity of between 2.5 and 4 kilograms of carbon equivalent per kilogram. To reach the highest credit rate, I believe the carbon intensity of the hydrogen produced has to be around 0.75 kilograms of carbon equivalent per kilogram. I don't remember exactly, I would have to check.

So basically there are three levels, as opposed to—

[Mario Simard, Bloc, Jonquière, QC]

That's perfect. However, overall, you would think that a hydrogen project produced from gas would be more expensive than a hydrogen project produced from hydroelectricity. Does the tax credit apply to the entire project and the infrastructure needed to produce hydrogen?

[Miodrag Jovanovic]

I don't know if it's necessarily more expensive when you do it by—