Public Accounts Committee on Dec. 2nd, 2022

[John Hannaford]

One of the applications here would be to take, say, wind. If you look at onshore or offshore wind on the east coast, you have the possibility of generating electricity that would create hydrogen, which could then be transported or consumed in another way. It's a way of capturing electricity, and it then becomes a vector for electricity, as well.

[Han Dong, Liberal, Don Valley North, ON]

Safety is a major concern for this technology. Can you update the committee on the safety concerns of this technology at this point?

[John Hannaford]

I'll turn to my colleague on this.

[Sébastien Labelle]

Thanks.

That's certainly a consideration. We have dedicated working groups, and through the hydrogen strategy we are specifically looking at standards, codes and precautions. As you said, safety is certainly number one for us.

[The Chair, Conservative, John Williamson]

Thank you.

That's the time, Mr. Dong, I'm afraid. That's five minutes.

Mr. Trudel, you have the floor for two and a half minutes. There is not much time left.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

All right. Thank you.

Ms. Hogan, back to you. I was rather surprised when you didn't answer my question earlier. You are the deputy minister of Environment and Climate Change Canada. I have before me a press release from your department dated July 12, 2021, which reads as follows: “committing Canada to cut its greenhouse gas emissions by 40‑45 percent below 2005 levels by 2030.” That was a press release from your department.

We have the Bay du Nord project, an oil drilling project off the shore of Newfoundland and Labrador. This will produce 73 million barrels per year over the next 30 years. It will also give off greenhouse gas emissions. We have been hearing quite a bit this afternoon that hydrogen, in the short term, will not be a key measure in terms of reducing greenhouse gas emissions. Maybe that will the case in 10 or 15 years. For the time being, however, this technology is still in its infancy. We are investing a lot of money without knowing what the results will be.

You say that the carbon tax, which will go up in April, will have a minor impact. What are the key measures, in concrete terms, that your government will use to reach the 40 to 45% reduction by 2030?

[Christine Hogan]

Thank you for the question.

I would just draw you back to the emissions reduction plan the government brought forward in March. It contained $9.1 billion in new investments and reflects economy-wide measures, some of which you have mentioned—carbon pricing and clean fuels—while also targeting specific action sector by sector, from the building sector to vehicles, industry, agriculture and energy, which we've heard a lot about today.

That plan was developed with input from tens of thousands of Canadians, experts and a very elaborate consultation process. It is, as I think we've tried to emphasize today, an evergreen plan, which will evolve over time, but it does present a comprehensive road map that reflects levels of ambition aligned to the Canadian target of 40% to 45% reductions by 2030.

This will be the subject of scrutiny, and it is. Through the new Net-Zero Emissions Accountability Act, the government is obliged to bring forward progress reports against that emissions reduction plan starting next year, in 2023.

There are a lot of elements to the emissions reduction plan, with very detailed implementation plans against each sector and, as I mentioned, also a fairly detailed annex that outlines exactly how we got to the measures, the modelling plan—

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Desjarlais, you have the floor for two and a half minutes. The time is pretty tight now.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair. I'll be quick.

In terms of the comments just made by the deputy minister on being ambitious in the plans that they've set out to do, it's important, I believe, especially given the report by the commissioner of the environment, that we actually make sure we transition ambitions into action. That is the concern of parliamentarians, and that is the concern of Canadians.

That is what we heard in the remarks of the commissioner. It was the issue of trust in ensuring that we can actually build the public capacity and the public trust that are necessary to achieve those goals. We heard that from the commissioner this morning in terms of the concept of trust.

For the deputy minister, how do we intend to actually ensure that we build trust for Canadians and ensure that we hit the targets that are set out by the government, when we know that the data that's collected in terms of the modelling to this point is insufficient in the way that it presents information and in some ways can be seen as misleading? I think that is the important part of the report that was published by the commissioner, as it distinguishes between facts and assumptions.

In relation to the assumptions—those things that are necessary to hit the targets here in Canada and that may not actually be invested in—how do we actually close that gap? What do you do, directly as the deputy minister, to actually achieve the construction of the good policy that you call part of the evergreen strategy? How do you actually build the things that are needed in Canada—like a green energy grid—into the actual work of your department? How do we actually get to a point where we see those results in a transparent way?

[Christine Hogan]

What you're highlighting is the attention to implementation. I think that is fully my preoccupation and the preoccupation of many across government who have initiatives that are detailed in the emissions reduction plan. It's one of the reasons the plan includes an implementation plan sector by sector, so that you can see how the various initiatives and measures are being advanced.

There will be—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

But are they being invested in?

[Christine Hogan]

Yes, they are. I mentioned the $9.1 billion that came and subsequent investments in budgets.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

How much has been invested in the green grid?

[Christine Hogan]

I don't exactly have that number, but I can get you that. I'm happy to do so.

[The Chair, Conservative, John Williamson]

I'm sure Mr. Desjarlais would like that information.

Your time is up.

We will now turn back to Mr. McLean, please, for five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

Thank you, Mr. Desjarlais. Those are really important questions.

I am going to go to paragraph 3.31 and one of the criticisms in the report here:

We found that when assessing opportunities to generate hydrogen using electrolysis, Natural Resources Canada assumed a very low price of electricity across all provinces. For example, it assumed an electricity price of $40 per megawatt hour across all provinces. This was well below the recent prices observed in Canadian provinces in 2020, which ranged from $52 to $124 per megawatt hour....

It was $264 in the Muskrat Falls scenario.

This meant that the department overestimated the opportunity of electrolysis to produce hydrogen at a low cost.

Following Mr. Desjarlais, all the assumptions you're making in this report you've put forward seem like they're back end-engineered. Can you comment on that, please?

[John Hannaford]

I'll turn to my colleague on this one.

[Sébastien Labelle]

The process to come up with those cost assumptions was not NRCan's alone. We hired external consultants. We had lots of engagement with lots of experts across many of the provinces, if not all. That's how we came to this number.

[Greg McLean, Conservative, Calgary Centre, AB]

So you're saying that there is plenty of blame to go around.

[Sébastien Labelle]

I'm sorry. Is there a question?

I think we are updating those assumptions based on the new costs as they become clear, and we'll have that in March or early next year.

[Greg McLean, Conservative, Calgary Centre, AB]

Well, I'll comment that Canadians do expect you to give them a realistic scenario about what we're facing here, and I think the report is quite clear that this is a very unrealistic scenario.

Let's talk about the full-cycle cost of carbon involved in green hydrogen or any type of hydrogen, if you will, because it does matter. It matters with the production of steel, concrete, copper and everything that's going to come from overseas to produce new turbines. They have a two-year run rate before they're energy-positive with the inputs that go into their production. In their 10-year life, obviously they're going to produce something at the end of the day, but they're also going to produce a lot of emissions. Those emissions go up as the resources in the world become more scarce.

Have you modelled that into your scenario at all? That would be an environment question, I think, more than anything.

[Christine Hogan]

Derek Hermanutz, would you like to respond to that in terms of the scenarios?

[Derek Hermanutz]

Yes, I would just say that our scenarios work in consultation with other departments and other parts of the department to try to build in the most realistic assumptions that we can, using the best information we have at the time.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Well, thank you very much.

I think we've proven pretty clearly in this report that the assumptions built in here don't seem realistic at all, but there is a cost here. There is a short-term and a long-term CO2 cost, and there is an indication why we aren't getting lower-carbon production in Canada: We aren't counting the full cycle of this.

Offshoring carbon production doesn't work either. If we get wind towers built in Germany and don't count that as part of our carbon footprint if we're going to use them in Canada for producing hydrogen, then we are missing half the equation.

I'm going to go back to the modelling here from both your departments. Was this modelling driven from on high in order to come up with a result to meet a government narrative, as opposed to a realistic scenario?

[Derek Hermanutz]

I would say it's our most realistic scenario at the time of the strengthened climate plan. It's a bottom-up modelling initiative, so it looks at each individual policy in conjunction with each other—