Good afternoon, everyone. I call this meeting to order.
Welcome to meeting number nine of the House of Commons Standing Committee on Natural Resources.
Pursuant to Standing Order 108(2), the committee is continuing its study of a greenhouse gas emissions cap for the oil and gas sector. Today is our fifth of eight meetings with witnesses for this study.
Today's meeting is taking place in a hybrid format pursuant to the House order of November 25, 2021. Members are attending in person in the room or remotely using the Zoom application. Please note that the webcast will always show the person speaking rather than the entire committee. I'd like to take this opportunity to remind all participants that screenshots or taking photos of your screen are not permitted now that we are in session. Today's proceedings will be televised and made available via the House of Commons website.
I think we have all been here enough times to know the health and safety information. Basically, we ask people to keep their face masks on if they're not speaking. For the members and anyone else who is here, please remain masked up.
For our witnesses, because you're new here, I'll go through a bit of information for each of you.
To ensure an orderly meeting, I'd like to outline a few quick rules to follow. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of floor, English or French. Members and witnesses may speak in the official language of their choice. Because of the translation services, we don't want to speak too quickly. Go at a normal pace and allow for the occasional pause in your statements so that the interpreters can keep up. That way, we can make sure that all of our members and those watching can participate fairly in their official language of choice.
For members in the room, raise your hand and I'll try to work with the clerk to decide a speaking order, both from within the room and on the screen. If you're on Zoom, please use the “raise hand” function and you'll be placed in order. We will do our best to make sure that we are as fair in recognizing the speakers as we can be.
Before speaking, please wait until I recognize you by name. If you're on Zoom, please click on the microphone to unmute your microphone. For members in the room, our team here will look after you. When you're not speaking, your mike should be on mute. I would remind you that all comments by members and witnesses should be addressed through the chair.
For today, on our study of greenhouse gas emissions cap for the oil and gas sector, I'd like to welcome our witnesses.
Appearing as individuals, we have David Keith, professor of public policy at Harvard Kennedy School; Andrew Leach, associate professor at the University of Alberta; and Jennifer Winter, associate professor at the University of Calgary.
From Environmental Defence Canada, we have Julia Levin, senior climate and energy program manager, and Dale Marshall, manager of the national climate program.
From the TC Energy Corporation, we have Robert Tarvydas, vice-president of regulatory strategy, and Christopher Vivone, director of federal government relations.
From the Trottier Energy Institute, we have Simon Langlois-Bertrand, research associate.
Each of the groups will be given five minutes for an opening statement. I have a handy timekeeping system. When you have 30 seconds left, I'll show you the yellow card. When your time is up, I'll show the red card. Don't stop mid-sentence, but wind up within a sentence or two. That applies when we're going through the rounds of questions as well, so that each of the members has their chance to interact with our esteemed panellists who are with us today.
With that, I will get my clock ready. We're going to the three individuals first for their five-minute opening statements.
We will start with Mr. Keith.
I will turn it over to you. You have five minutes.
Thank you very much for inviting me to speak.
First are some sound reasons to oppose a cap. Every tonne of carbon is equally bad for the climate, so why pick on the oil and gas industry emissions for a hard cap? The point, the entire point, of Canada's impressive carbon pricing scheme is to let the market find the cheapest and best ways to save tonnes rather than having the market be in the business of micromanaging individual sectors. We don't have a cap on Internet or air travel, so why oil and gas?
Yet I am in favour of a hard cap. My rationale rests on concerns about Alberta's and Canada's economic future in a carbon constrained world.
The climate is getting a much higher level of political attention at the top levels of major governments in a way that's really different from any time in the whole 30 years that I've focused my career on climate change. The world will not cut emissions as fast as environmentalists like me want, but they will be cut. Oil demand will peak and it will decline. The technology for accessing tight oil, fracking, will spread, putting a long-term restraint on prices and making Canada's oil, with its comparatively high upstream emission, relatively less competitive.
Even with war today, sadly, oil is 25% below its inflation adjusted price peak and futures point lower suggesting the market sees this as a blip.
I moved to Alberta from Pittsburgh. I've seen what a crash looks like. I've seen what it does to people. As an Albertan, one who wants to see good jobs for my children and my friends, including many friends in the oil patch, my judgment is that digging the economy deeper into oil and gas will just make the crash harder.
It's easy money now that we buy at the price of our children's economic future and of the planet's climate future. My hope is that government sends a clear message, a message that drives private ingenuity and investment away from oil and gas and towards new businesses that can harness Alberta and Canada's brain power, its engineering strength, its engineering services sector to develop new value-added businesses that can thrive in a world as oil and gas decline under a carbon constraint.
Some hope that a cap will drive investment in cutting emissions in upstream oil and gas. Even in some sense that's its formal purpose. It may. But despite serving years ago on the five person federal panel that recommended some of the key carbon capture and storage investments in Alberta, I hope that little effort is put into reducing upstream emissions. Doing so will just sink more money into cutting those emissions, and that can't in the long run secure Alberta's or Canada's economic future. It may divert money from other investments, so increasing our dependence on oil and gas.
After all, eliminating upstream emissions can only eliminate about a fifth of the overall emissions from the life cycle of oil and gas use. Most emissions come when the product is burned. The problem is the product, not the process of making it. That is the essential reason why Alberta and Canada must look beyond the oil and gas sector.
If we want a stable climate, we can't keep putting CO2 in the atmosphere. We can argue about how quickly the transition needs to be there and there are legitimately different views, but we will have to stop.
I urge you to move towards a stringent cap on upstream oil and gas emissions both to protect the climate and because it is in the long-run interests of Albertans and other Canadians whose economies are tied to oil and gas.
Of course, people with short-run interests in the current system, the fossil fuel party, will argue the contrary, but theirs are not the only legitimate voices in Alberta.
Thank you very much.
Thank you for inviting me today. I'm pleased to be here to speak to you about this very important issue.
Canada will undoubtedly require more stringent policies to meet its commitments, its international and domestic commitments, to reduce emissions. I strongly support and have worked on the implementation of these policies, but with that in mind, I'm not convinced that a regulatory cap on emissions from the oil and gas sector is needed.
A sector-wide declining cap on emissions could represent a financial, technical and constitutional challenge, and lead to less cost-effective emissions reductions attributable to Canadian policies.
The oil and gas sector is Canada's largest emitting sector. Oil and gas production accounted for 191 megatonnes in our last inventory year of 2019, which is just slightly more than the 186 megatonnes that we measured for transportation. Importantly, forecasts show that these emissions are unlikely to decrease meaningfully unless more stringent policies are imposed.
There should be no question that oil and gas production contributes substantially to Canada's emissions. As Professor Keith so eloquently said, the emissions embodied in Canadian hydrocarbon production are a significant source of global emissions. Absent significant decreases in emissions from the oil and gas sector, Canada's goals will become increasingly challenging and eventually, for all intents and purposes, impossible to meet.
When you say something like that, a lot of times people will respond and say that the emissions intensity has been improving. I'd like to point out that this is not consistently true. The average Canadian barrel of oil has become more emissions intensive over the past three decades. The reason for that is simple. More of our barrels are coming from the more emissions-intensive oil sands. More of those oil sands barrels are produced using more emissions-intensive in situ processes. Within individual sectors the stories have been good, but overall there is not as much to sing about as some might have you believe.
The story is slightly better for natural gas, but there we only see a slight long-term decrease in emissions intensity.
What's driving this story? We know that the biggest driver for production and thus for emissions in the oil and gas sector are factors beyond our own borders, like commodity prices. Commodity prices are influenced by everything from technology to global development to the war that we've all been talking about these last few days.
High prices will generally mean more willingness to invest to maintain production in spite of carbon policy changes, but that type of analysis begs the question of whether oil prices, combined with carbon pricing and with a regulatory cap on emissions are going to lead, as Professor Keith said, to sufficient investment to decouple emissions from production.
My belief, like his, is that this is unlikely to happen, perhaps for a slightly different reason. Echoing some recent statements from industry leaders, there's just not enough long-term certainty on the policy side. There are some measures that can close this gap, like tax credits, etc., but a regulatory cap doesn't get you farther towards that goal.
The next thing I'd point out is that, in arguing for the Greenhouse Gas Pollution Pricing Act before the Supreme Court, the Attorney General argued strongly that economists support carbon pricing because it's the most cost-effective way to reduce emissions. They cited my own testimony before the finance committee of this House to support that claim, so I have to stick with that.
The cost-effectiveness of carbon pricing comes from applying the same price to a whole set of emissions—to as many emissions as you can.
With that in mind, I would ask two questions.
First, would we want more stringent policies applied on some sectors than on others?
Second, even if we did, do we need another mechanism or another policy to do so?
My answer to both of these questions is no.
I say we do not need more stringent policy on one sector than others and we do not need new policies, even if that is what we choose to do. Carbon pricing gives us all the tools we need.
That emissions in one sector are more resilient to carbon pricing is indicative that there is more value there per tonne of carbon emitted, which is what carbon pricing drives our economy towards. The judgments about whether that value will be present in the long term are generally not best made by governments. But, if government chooses to do so, Parliament has the means to ensure that carbon prices are reflective across the investment, production, export and combustion decisions related to hydrocarbons.
The carbon pricing regulation is there. The clean fuel regulations, the Bill measures and the tax code are all there.
In conclusion, if this proposed oil and gas cap is just an expression of what we expect policies to bring, so be it, but I question the need for and the efficacy of a new regulatory mechanism.
Thank you. I'm sorry for being 10 seconds over.
Good afternoon. Thank you for inviting me to appear before the committee on this very important issue. It is a privilege to speak to you today.
I'm an economist, and my research expertise is energy and environmental policy. I focus on climate change policy and in particular, emissions reduction policies and their effects on households and emissions-intensive and trade-exposed industries. I draw on this expertise in speaking to you today.
Canada faces a challenge in reducing emissions and simultaneously protecting the quality of life and economic growth that we enjoy. I strongly support implementing increasingly stringent policies to meet Canada’s commitments under the Paris Agreement. At the same time, adaptation to and mitigation of climate change is a complex problem, and the various policy solutions should be weighed very carefully. My comments today reflect both my support for emissions reductions and my desire to see thoughtful climate policy design that maximizes benefits and minimizes costs to Canadians.
From a global perspective, as well as for Canada’s Paris commitments, the source of emissions does not matter. A tonne is a tonne is a tonne, regardless of whether the emissions come from Nova Scotia or Alberta, from home heating or oil and gas production, and yet, as numerous witnesses at this committee have noted, the oil and gas sector is a significant contributor to Canada’s emissions. The sector’s emissions must decline in order for Canada to meet its 2030 and 2050 emissions reduction targets. This is the case for all parts of the Canadian economy, including households.
The important question facing this committee and the government is whether a cap on oil and gas emissions is necessary to achieve the desired emissions reductions. Specifically, what policy problem does the cap solve? I respectfully submit that the government already has the necessary policy tools at its disposal, and that a cap on oil and gas emissions would unnecessarily damage the Canadian economy. My concern is fourfold.
First, a sector-specific emissions cap overlaps with existing policy. Emissions pricing, whether the federal backstop or provincial or territorial systems, creates incentives for emissions reductions in both the demand and supply sides of the economy. On the demand side, the emissions price increases the cost of fossil fuel-based energy sources like gasoline and emissions-intensive goods and services. The emissions price lowers demand for these products by incenting changes in consumption patterns. On the supply side, emissions pricing increases the cost of production, incenting changes in production processes to avoid the price.
Moreover, the proposed clean fuel standard creates a market for emissions reduction credits, further incentivizing emissions reductions across the Canadian economy. This market ensures firms receive a return for investments in emissions reductions beyond avoiding paying the emissions price.
Given that these two policies are already in place, a cap on oil and gas emissions adds little to Canada's tool kit and is potentially more costly than beneficial, which leads me to my next concern.
Differential treatment of a specific sector reallocates capital and labour throughout the economy, moving these production inputs away from their most productive use. This artificially expands some sectors, shrinks others and lowers Canada’s productivity.
Third, and relatedly, differential emissions prices, either implicit or explicit, in different sectors mean some firms engage in more costly emissions reductions than would otherwise be the case. This results in more costly emissions reductions overall, increasing the cost of meeting Canada’s targets.
Fourth, an emissions cap for the oil and gas sector adds complexity in an already complex climate space. Canada already has differential prices via different provincial, territorial and federal systems, and adding an additional regulatory cap exacerbates this complexity. A cap on emissions would be administratively costly for the government and adds to the compliance burden for firms, increasing their costs. It needlessly complicates the Canadian climate policy landscape. Moreover, it moves us away from a consistent approach to emissions pricing across Canada.
Given these concerns, a direct approach is a more appropriate, easier and less costly way to reduce oil and gas emissions. This could include reducing output, increasing the stringency of the emissions price or reducing the output subsidy that emissions-intensive and trade-exposed sectors receive.
To conclude, I have three main points. First, there is nothing special about oil and gas emissions; a tonne is a tonne is a tonne, and prices should apply uniformly to all sectors. Policy that ensures consistency in emissions pricing across the economy is vastly preferable to special treatment of one sector.
Second, Canada already has the necessary policy tools in place to reduce emissions from all sectors of the economy. The question is whether the existing emissions price is sufficiently stringent to meet these targets and sends a long-term signal to firms to invest in large-scale and expensive emissions reductions.
Third, using existing policy mechanisms avoids complexity and unnecessary and higher costs for the same emissions reductions.
Thank you for your time. I look forward to answering your questions, and I apologize for going over time.
Thank you, and thanks for the invitation.
I'm joining from the unceded territory of Algonquin Anishinabe peoples, also called Ottawa.
I'd like to start with today's report from the Intergovernmental Panel on Climate Change, which frankly paints a terrifying picture of our future if Canada and the world doesn't tackle fossil fuels with the urgency needed.
The report states:
“The scientific evidence is unequivocal: climate change is a threat to human well-being and the health of the planet. Any further delay in concerted global action will miss a brief and rapidly closing window to secure a liveable future”.
The blind spot in climate change for Canada for 30 years has been the oil and gas industry. While other sectors have reduced greenhouse gas emissions, oil and gas companies massively increased their production and emissions, and emissions from Canada's fossil fuel exports are increasing even more rapidly and are now greater than Canada's total greenhouse gas emissions. Now, however, Canada has an opportunity to shine a light on that blind spot and to address the root cause of climate change: fossil fuel production and use.
committed to cap oil and gas emissions today and to ensure that they decrease tomorrow at a pace and scale needed to reach net zero by 2050. This will be the defining moment for the Prime Minister's legacy on climate change.
The oil and gas lobby will attempt to weaken, delay or kill this policy because it disrupts their business model of pumping more and more fossil fuels into the global market and more and more carbon emissions into the atmosphere.
Many companies, including the major oil sands companies, have actually pledged to reach net zero by 2050, the goal of this policy, so why have so many oil executives already opposed it? Pure greenwashing. Their net-zero plans are vague and weak, with far-off promises, loopholes to allow emissions reductions from other sectors and other countries, a reliance on false solutions for the oil and gas sector, like carbon capture and storage and blue hydrogen, and an expectation that Canadian governments will hand over $50 billion or more in subsidies to realize them.
The must not blink from the inevitable pressure and hostile attacks from big oil's lobby and PR machine. The IPCC noted that misinformation and active resistance to climate action from the oil and gas industry have made us more vulnerable. It's time for the federal government to act in the interest of all Canadians.
Capping oil and gas emissions is a key part of this, but to do so, the government must do the following:
One, set hard caps for 2025 and 2030 that represent the oil and gas sector's fair share of emissions reductions. For 2030, that's a 60% reduction below 2005 levels, or 65 million tonnes.
Two, include all emissions from the production and use of oil and gas. Addressing only production emissions means ignoring 80% of the problem.
Three, deny subsidies and loopholes to oil and gas companies. The polluter pays principle must apply here. Canadian oil and gas companies will make $200 billion in profits in 2021 and 2022, and yet they shamelessly go to Canadian governments, cap in hand, asking for corporate welfare to reduce emissions.
Four, put people first. The oil and gas cap must be aligned with a full and sincere implementation of the UN Declaration on the Rights of Indigenous Peoples and a fair, managed and government-funded transition for workers and communities.
These are ambitious caps that we're calling for, but they are possible, and they are appropriate, so how can these caps be met? In addition to placing a hard cap using the Canadian Environmental Protection Act, there are four complementary actions that the federal government should take.
First, stop approving new oil and gas projects. Economic attrition would shrink Canadian oil and gas production by over 30% this decade and reduce carbon emissions commensurate with that. That includes the offshore oil project Bay du Nord, which will be a carbon bomb for the planet.
Two, strengthen methane regulations immediately. At least 20% of GHG emissions from oil and gas facilities are in the form of methane, and yet reducing those is very cheap. Today, methane from oil and gas can be reduced by 88% at less than $25 a tonne.
Three, call the industry's bluff on emissions intensity. The industry has committed to getting to net zero by 2050. If that were achievable, then emissions intensity should improve considerably in this decade.
Four, remain steadfast on a hard, enforceable cap, with still penalties for non-compliance. If the other three measures aren't enough for the oil and gas sector to do its fair share of emissions reductions, then companies will have to curtail production. The alternative is to let companies escape responsibility and impose catastrophic impacts on the rest of us.
This is a critical test for the . Despite the progress on climate policy in recent years, Canadian greenhouse gas emissions remain unacceptably high. The Prime Minister must remain steadfast in the face of the inevitable ferocious attacks from the oil and gas lobby and put into place robust regulations to curb pollution from Canada's biggest polluters.
Hello and good afternoon, committee members.
TC Energy recognizes the important work this committee is doing to seek out and listen to a wide range of perspectives on the development of an oil and gas emissions cap, and we appreciate the invitation to share our views. With over 65 years of experience, TC Energy is a leader in the responsible development and reliable operation of North American energy infrastructure.
We recognize the importance of addressing climate change and a significant undertaking to transition Canada's economy for a low-carbon future. In October 2021, we announced new targets to reduce the GHG emissions intensity from our own operations by 30% by 2030 and are positioning the company to achieve net-zero emissions from our operations by 2050. We support the goals of the Paris Agreement and are ready to undertake the critical challenge before us as we move to a low-carbon future.
We know a strong climate change policy will take a collective effort amongst industry, government, communities and consumers to achieve meaningful emissions reductions. As government considers the scope for an oil and gas emissions cap, we believe the desired policy intent can be achieved by focusing solely on direct GHG emissions occurring within oil and gas industry operations.
Focusing on scope 1 emissions adheres to the principle of environmental responsibility and liability, which forms the foundation of environmental regimes in Canada and internationally. Moreover, focusing solely on scope 1 emissions will help avoid double counting, regulatory and decarbonization inefficiencies, negative energy security and economic impacts, and implications to cross-jurisdictional collaboration, both interprovincially and internationally. In doing so, government can utilize existing complementary levers, such as carbon pricing, methane regulations, clean electricity standards and clean fuel regulations to achieve the desired emissions reductions objectives in the most efficient and cost-effective way for industry and consumers.
We see numerous opportunities to decarbonize our own pipeline operations in both the near and long term. Asset modernization will help reduce vented and fugitive methane emissions associated with regular operations and maintenance and improve overall operational efficiency. We've already achieved notable operational emissions reductions through turbine retrofits.
To address methane emissions. we recently piloted a field trial of a zero-emissions vacuum compressor during inline inspection. We intend to reduce our carbon footprint by converting gas compressor stations to electric motor drives, and to decarbonize our power consumption by sourcing renewable and low-carbon power. Renewable natural gas and hydrogen blending opportunities will further reduce our emissions profile.
In Quebec, TC Energy has transported renewable natural gas from two landfill sites since 2002 and helped advance the province's standards for biomethane transportation. Through the Alberta carbon grid, TC Energy will play a key role in deploying carbon capture utilization and storage technology. We are actively developing and deploying advanced software and systems to enhance our ability to monitor and track emissions across our systems.
Government must ensure that industry's ability to adhere to an oil and gas emissions cap is achievable and economically efficient. The inability for the oil and gas sector to cost-effectively decarbonize to the levels required by an overly restrictive emissions cap would effectively create a cap on production, with irreversible impacts on energy security, reliability and affordability. This would significantly impact both Canada's economy and balance of trade, while having a negligible impact on global emissions as production moves to jurisdictions with inferior ESG profiles.
For context, the Canadian oil and gas sector provided $105 billion to Canada's GDP while supporting nearly 400,000 jobs in 2020. Commodity price recovery since 2020 will significantly increase this figure in the years following. Inefficient cap implementation would jeopardize the sector's key contribution to both national jobs and GDP, while negatively impacting energy affordability for other industrial sectors and Canadian consumers.
A healthy oil and gas industry is also needed to allow industry to support economic reconciliation priorities and financial opportunities for indigenous groups. At TC Energy, we want the future of Canadian energy development to be more equitable and inclusive for indigenous peoples and communities, and we are taking action to contribute to lasting change through our own reconciliation action plan. Projects like Coastal GasLink are providing significant benefits to indigenous communities, with over $1 billion in contract awards to indigenous businesses or their joint venture partner businesses.
Thank you for providing me the opportunity to provide you with TC Energy's overarching perspective. I'll be glad to address any questions you may have at the appropriate time.
Thank you for inviting me and giving me the opportunity to provide information on this very important topic. I hope you'll find it useful as you consider this measure.
I will be making my opening statement in English, but I'll be happy to answer questions in the language in which they are asked.
The remarks I'm making here are based on two sets of work. The first is the extensive modelling work we did as part of our Canadian energy outlook, which we publish every few years. It assesses trajectories to meet differentiation reduction targets, including the current 2030 and 2050 targets. The second set of work is sectoral analysis that we do for the shorter term, including more recent trends and how actors are moving at the moment.
When considering the cap, to get to the 2030 GHG reduction target of 40% to 45% compared with 2005 levels, which is to say, roughly, today's emissions levels, Canada needs 5% year over year reductions for the entire economy. To achieve this short-term target, it's necessary to focus on sectors where deep emission reductions are possible in the shorter term, while at the same time, initiating changes in other sectors where short-term reductions are more challenging.
Meeting the 2030 target means that the government must focus on sectors that can transform deeply in less than a decade. At the same time, they can delay starting the broader changes needed for the 2050 net-zero goals in sectors that will move more slowly. The correlator to this is that for some sectors, it's very difficult to foresee a 40% to 45% reduction by 2030. This can be due to cost, for instance, in sectors where technology is in earlier stages of development, like heavy transport. This can also be due to technological challenges such as in some industrial processes where no carbon alternative exists at the moment.
For these reasons, the 2030 short-term target must be considered with care and implies the identification of these differences across the entire economy. With this in mind, most substantial reductions to achieve the 2030 target should come from the oil and gas sector. This is both the cheapest way to meet a country-wide target and the most straightforward. In our modelling, we estimate the need at more than 60% of emissions reduction for the sector compared with today's levels, and that's assuming that all other sectors are perfectly successful in their own reductions.
Although these reduction levels are certainly massive, it's important to note that not reducing emissions from oil and gas production by that extent means that other sectors will have to compensate in order for the economy to meet the 2030 target, which means that more expensive and, in some cases, more technologically challenging transformations will be needed elsewhere, for instance, in other industries, in the transport sector and so on. This is not to say that deep and rapid reductions in emissions from oil and gas production can substitute for substantial measures as part of the policy portfolio for other sectors. Rather, it's essential to understand that the 2030 target cannot be achieved without a deep transformation in the oil and gas sector.
In terms of the cap, a hard cap on emissions for the sector could be implemented in a variety of ways and can lead to transformations of different forms, as previous speakers have noted. It includes limits to production levels and, of course, also a very rapid ramp-up in improvements to emissions intensity, carbon capture and storage where it may be economical, and so on. The important thing to remember is that imposing this cap for the industry, through a cap and trade system for instance, could let producers and refiners decide how to meet their obligations.
Importantly, the theoretical effect of the cap is to drive innovation and investment—at least that's the idea—but whatever the means to meet the cap, CCS or whatever else, as long as the reductions are there, perhaps that's the most important thing.
Perhaps as importantly, the imposition of a cap with a clear schedule for reductions has the benefit of contributing to eliminating one of the key barriers to transformation across all industries, which is the policy uncertainty surrounding the climate pledges. To initiate the investments and encourage the innovation needed to achieve our climate targets, industry actors need a stable investment environment, and a stringent cap on emissions from the most emissions-intensive sector would certainly be an important stepping stone in doing this.
Although it's not limited to choosing to impose a cap or not in order to reduce emissions, given the depth of the transformation that we're talking about here and the fact that part of this industry may need to reduce production to meet the cap, any measure should be accompanied by support to offset any negative economic impacts from decarbonization on communities and workers, proportional, hopefully, to the economic disruption caused by meeting specific targets.
Thank you, everybody, for your opening statements.
Just before we get into our rounds of questions, we've received a notice, since the meeting started, from the procedure and House affairs committee that a change to our committee has been formalized. With that I'd like to officially welcome Mr. McLean and Mr. Bragdon, who will now be regular members of our committee.
Welcome. Mr. McLean, I know you've been here before, so welcome back.
Mr. Morrice, I would also like to acknowledge that you're here and joining us once again. It's good to see you as well.
We're going into our rounds of questions. Each of the first four members will have six minutes.
For the witnesses, I know some of you have been here before. For those who are here for the first time, I very much let the members control their time. They will decide who they're going to ask questions. If you have something, you can try raising your hand, but it will be up to the member to decide if they want to go there or if they want to pursue their own line of questioning. Sometimes they can be a bit short, just because they have a limited amount of time and want to get through as much testimony as they can.
With that, we'll get started.
Mr. Melillo, I believe you're up first. It's over to you for six minutes.
Thank you very much, Mr. Chair.
I want to thank all of our witnesses for taking the time to join us today and to have a conversation about this important topic.
I would like to start with the folks from TC Energy, whoever is going to answer.
In your opening remarks you talked a bit about economic reconciliation. It's obviously an important principle for all the industry we have across the country. It's important in my riding and, of course, for oil and gas as well.
This is a bit of a broad question to start off with, but I'm just wondering if you could speak about the importance of economic reconciliation and the impacts oil and gas projects can have on first nations, particularly in western Canada.
Thank you very much for the answer. I appreciate that.
Obviously, as well, there's been a discussion in the last week or so about what's happening in Europe with Russian aggression and the horrible war we're seeing now in Ukraine. I think it's really sparking a conversation across the country about Canada's ability to be more energy independent and to produce more here at home.
On Twitter, the has actually said that he plans to ban all imports of Russian crude. I don't know whether my colleagues across the way can confirm that for me, but I think that's definitely a positive step our country should take. Again, it goes back to how important it is that we're supporting Canadian industry here.
Can I get your thoughts on how an emissions cap might impact projects in Canada if it's on production broadly rather than on emissions specifically?
We're off to a good start, so I'm going to continue along the same lines.
My question is for the TC Energy representatives.
In their statement, one of them said that the sector would not be able to remain profitable if the government tightened the rules too much.
I have trouble seeing how it's possible to reduce the emissions intensity of the oil and gas sector without making huge investments in the carbon capture and storage technologies we hear so much about.
I'd like one of the TC Energy representatives to clearly tell us whether that is something the industry alone can accomplish, without the financial support of the government.
I have a question for Ms. Winter.
In your opening statement, you said that the source of emissions didn't matter and that the oil and gas sector should not be singled out. I can give you some real-life examples. Where I'm from, aluminum is a major industry. In a few years, the sector will have managed to produce carbon-neutral aluminum thanks to inert anodes. Almost all the R and D costs were assumed by Rio Tinto, which made a decision to get in the carbon-neutral aluminum game.
When I see the mountains of taxpayer money being invested in Canada's oil and gas sector, I think it's a bit rich to say that the source of the emissions shouldn't matter. We all know oil is the problem. Disregarding the source of the emissions places the burden on all the other sectors of the economy. That is more or less what one witness told us.
Do you agree with that statement?
Thank you. It's a great honour, always, to sit at this table.
I sometimes feel as though I'm living in a world of disconnect, because this is a conversation that I think would have been great in 2004, 2006, 2008, and we would have all trusted that things were going to get done.
Yet, I read the IPCC report today. It is painting a picture of a catastrophe unfolding in real time. It completely goes after the big emitters, countries, failing to do their job. It talks about “an atlas of human suffering & damning indictment of failed climate leadership”. And yet, I see, well, you know, we'll just carry on and things will work.
Mr. Marshall, I'd like to ask you, based on what you're seeing from the IPCC and based on Canada's record, do we have any chance of meeting our international targets at the rate we're going?
They've factored in the carbon price and it is still extremely profitable for them to do that.
I want to ask you, though, about this issue of intensity targets. I remember with the Harper government it was intensity targets all the time. It's sort of like we're being told, “Don't worry. If we deal with intensity targets, we're going to lower emissions.” It's kind of like telling people, “Listen, if you're a teenager and you smoke light cigarettes, you're not going to get cancer.” We haven't actually ever seen the emissions go down. The emissions have gone up consistently over the last 20 years.
How important do you think it is to put the full nature of the emissions in?
The emissions from oil and gas export are more than all the emissions put together in all the sectors. If we counted those in, would we have a much clearer picture of Canada's massive carbon imprint on the planet at this time of crisis?
Thank you, Mr. Chair. I would certainly like to follow up and thank all of our online visitors and witnesses today for their presentations.
Thanks to Mr. Tarvydas for his presentation from TC Energy Corporation.
The goal is to try to bring down the greenhouse gas emissions. You want to be a premier source of carbon-free energy for North America in particular, which helps the world, in the industrial natural gas and oil sectors. The investments in technology are one way to do that.
I want to ask you a question about what's happening on the ground today. There have been lots of changes in the last few days, and numerous people are calling on governments around the world, not just here in Canada, to stop purchasing Russian energy.
It's clear that if countries cut them off, Canada couldn't immediately meet that energy demand in places like western Europe. It is relevant. It's not just looking after ourselves; it's looking after our allies as well. While it's too early to determine the worldwide long-term energy implications due to Putin's unprovoked war, I'd like to ask what advice you have to the government on building that uncertainty into this emissions cap regulation process.
Mr. Chair, the question of energy security, and potentially reliability, is one that requires long-term investments. One of the asks we would have of this committee and this government, as you're considering developing policy instruments related to emissions caps, is to take a long-term view to provide industry with as much certainty as possible, because the very long lead time for some of these investments—capital costs for some of these investments—is very high.
Obviously, as you stated, you can't create LNG terminals overnight. You can't build pipelines overnight. These things take many years to put in place. However, as the world considers the role of energy security and energy reliability as we go forward, even in the context of the global climate crisis, I think it is important that this government consider the importance of providing policy stability and certainty as it considers these regulations.
There's another component of that too, if I may add, which is the consideration of how these policies interplay with each other. Our recommendation is that any policy that's put in place is consistent with the Paris Agreement and with existing policies that are already in place. It would be, I think, quite helpful to see a comprehensive study of all the climate policies already in place in Canada at the federal and provincial level to actually see how they currently interact with each other.
I want to welcome the new members of the committee.
My question is for Mr. Leach.
Mr. Leach, you've done extensive work in this field. I'd like to ask you about your work specifically with the Smart Prosperity Institute and the greening growth partnership.
The institute states—and this is a direct quote—that their vision is a “stronger, cleaner economy that builds a better future for all Canadians. We are dedicated to realizing a thriving economy, healthy environment, and high quality of life, achieved through decoupling environmental harm from economic success.”
In practical terms, I'd be interested in hearing from you what should be some best practices that could be adopted for realizing that vision with success.
Well, I certainly don't speak for Smart Prosperity on their grant as a co-investigator, but certainly, if you want their overall position, I'd encourage you to bring in some of their leadership team to speak.
On a more general question, I think the starting point for any economist is to make sure the costs of production, all of them, are internals of those—and consumption as well—in making the decisions, so that when you decide to produce oil and gas, the emissions, the tailings and the environmental damage associated with that production are not passed on to someone else without you having to pay that freight, and that, as a consumer, those costs are reflected in the prices you pay.
Whether it's carbon pricing or whether it's the acid rain program types of policies that Mr. Angus talked about earlier, I believe, and that had a big impact in your region as well, I believe, those are all examples of things where we've put the cost of environmental damage into the business decision, and that, to me, is always the gateway to that type of linking environmental performance with economic prosperity.
Last September, just before the federal election, you wrote a blog that was entitled, “There's only one climate vote in this election and it's for the Liberals”. You said—again, this will be a direct quote, from your blog—that the “Trudeau government had to fight for every inch of their policy progress in the courts, in the election campaigns of 2015 and 2019, and almost every day in between. And, at every step, they were fighting The Resistance”—that was the term you used—the coalition of conservative provincial premiers and their allies in the opposition and Senate benches in Ottawa committed to stopping progress on climate policy in Canada.”
How do you see federal policy developing efficiently and effectively at the rate we need to see to meet climate goals when continually being challenged by, in your words, the resistance?
Thank you to all my friends around the table, as we share our goal of actually getting to a cleaner emissions industry and economy across Canada. I'm glad everybody here is focused on that result.
Let me first of all congratulate Mr. Tarvydas on his company's being at the forefront of dealing with the capriciousness of foreign political short-term decisions, especially on Keystone XL, which would have lowered the emission intensity of all of the oil consumed in North America, which will now be displaced by foreign oil supplying the United States. That's one of the things we have to look at here: lowering the emissions for all the energy consumed in the world.
This brings me to my point. I'm going to ask Ms. Winter, because she's an economist and she and I speak somewhat the same language.
When you look at this foreign balance of trade, if you will, in Canada in 2020, the oil and gas industry accounted for about $86 billion of foreign trade, primarily with the United States, of course. If we took that off, do you know offhand exactly how much the balance of trade would be in Canada?
Because I believe there were some questions before, I wanted to make sure to clarify that Canada has not imported crude from Russia since 2019 and that, in fact, we are banning further imports. It's not as of today, because there are no imports today.
I want to start with Professor Winter.
I'm hearing from a whole bunch of witnesses who all want to row to the same place. We saw the IPCC report today. We know that we need to deal with responding to climate change and reducing emissions quickly.
I'm hearing from some people who have a contrary view to yours. They've been saying that an oil and gas cap is absolutely necessary to deal with that problem and to get us there.
If you were in my position, how do you respond to that? How do you make sense of where to go from there, because I have two very contrary points of view being presented today.
We have the policies in place to meet our targets. It's a real question of stringency.
Yes, moving to $170 Canadian per tonne may not allow Canada to reach its 2030 targets, and increasing the price after that may not allow Canada to reach its 2050 targets, but that doesn't mean there needs to be special treatment of the oil and gas sector. There can be an economy-wide increase in the stringency of the emissions price to create that incentive for emissions reduction.
There can also be a reduction in the output subsidies provided to sectors designated as emissions intensive and trade exposed, and that increases their costs, further providing emissions reduction incentives.
The other option is broadening the base of what is subject to an emissions price by removing special exemptions for specific economic activities.
I just wanted to go back again as well. I've mentioned in previous committees my enthusiasm for technology in our industry to be able to develop systems through the private sector and universities and colleges to reduce greenhouse gases around the world and, obviously, for the 1.8% or 1.6% we have here in Canada, to do everything we can to get that to zero as well.
There are concerns from my colleagues as well, in that if we did hit zero, the 2% would be very easy to replace by the types of oil that have much higher carbon content than what we have in low-carbon content in Canada.
I want to ask Mr. Tarvydas this, and maybe I'll have time for others. In regard to the study we're doing in that area, it's on an emissions cap. Some have said they want to see a production cap, but the witnesses we've had so far have all agreed that this would be an emissions cap, and that's good for the world.
I want to hear your thoughts in regard to the use of technology around the world—we have the expertise and it's already being done here in Canada—on how that would play out if we could actually export the technology around the world and get greenhouse gas emissions down. A prime example is the coal industry, which some mentioned earlier. We already have systems in Canada that will scrub it as clean as liquid natural gas, basically, but it's very costly. Can you respond to that first? I know that you mentioned the nuclear advantage and everything, but I'd like to have your opinion on that.
Thank you to all the panellists for their presentations today. It's very interesting, not unlike several of the meetings we've had as a part of this study, where we've heard support directly for carbon pricing and from others for cap and trade, from some with regard to production and from some feeling that we need to focus on carbon and not on production. We keep hearing different messages from different panellists.
When Mr. Angus was questioning Mr. Marshall, Mr. Marshall indicated that we could not reach the targets we've set by 2050. I'd like to ask Mr. Keith in particular, because we haven't heard a lot from him so far in this panel, if he shares that perspective, and if he shares the perspective that we need to cap at 2019 levels but keep reducing until we get below 2005 levels.
If there is any other panellist who would like to respond to that, I'm interested in knowing if you share that view or if you have a different view or a more optimistic view about where we're going and the direction we're headed in, but I'll certainly start with you, Mr. Keith.
I'd like to move on to Ms. Levin on a question.
Obviously, whatever we do here as a government is going to have a significant impact on workers and families and on economies in various provinces, especially in the Prairies right now, where we're hearing a lot about this. I know it's easy to say that we have to get behind the transition. I think we're all behind it. I think the majority of Canadians are very much behind this and want to see real results; however, there is a serious issue here that affects the economy as well and affects workers and their families.
You suggested that we have to create those opportunities. What are those opportunities? What would you be proposing today to those provinces and those thousands of workers who are going to be impacted? That is a responsibility that our government has to look at, as well as the climate piece. We want to do both, and we want to do both well.
I think it's incredibly important that we make sure the way we are putting in climate policies brings workers alongside. We know that investments in the fossil fuel sector have the lowest job creation potential of any sector of the economy.
That $50 billion to oil and gas would result in so many safer jobs, good-paying jobs, if we took that money and invested it in the renewable energy sector, in energy efficiency and in the clean growth economy, which have a future in a carbon-constrained world, whereas, as I said before, oil and gas are on the way out, as we see car companies committing to go fully electric. This is the sector that is the sector of yesterday.
We decide whether we want to equip our communities to succeed in the parts of the economy that actually have a future and bring those workers along, or we're stuck in the past, and it's workers who will suffer as a consequence.
Just like with Smarties, I saved the best for last.
I have a quick question for Mr. Langlois-Bertrand. In your opening statement, you said that costs and technological constraints would make it difficult to achieve our emission reduction targets, especially in the oil and gas sector. You also said that sector should be putting forth the most effort. I want to point out that the recently stated his intention to phase out fossil fuel subsidies by 2023, calling them inefficient.
As we know, the devil is in the details. What, then, makes a subsidy efficient versus inefficient? I don't want to put words in the minister's mouth, but my sense is that Canada is about to provide financial support for strategies such as green hydrogen production and carbon capture. However, there is a basic principle when it comes to environmental measures, the polluter pays or bonus-malus. Therefore, activities with a low carbon footprint should be rewarded and those with a large carbon footprint should be discouraged. In light of that, could you comment on federal government investments in hydrogen and carbon capture strategies?
Thank you for your question.
You have to be careful when it comes to carbon capture. Indeed, short-term investments can seem appealing. I'm going to refer to a few of the statements made earlier. The idea is to achieve net-zero emissions by 2050. Technology will get better, but right now, that means a staggering amount of gas already has to be captured, unless we stop all agricultural, industrial and other such activity. If every sector starts capturing carbon instead of reducing emissions, despite being difficult in the short term, the future of carbon storage is likely to be riddled with complications. The quantities will become impossible to manage, mainly because we have little experience in storing huge quantities of carbon.
On the hydrogen front, the future is very uncertain, in Canada and elsewhere. Many companies and countries are choosing to go in another direction, while others continue down this path. It's tough for the government to make a choice at this stage in the game. It needs to move forward on a gradual and short-term basis. It's not an easy solution.
We're out of time. As I said, we have some committee business.
Before we do that, thank you to the witnesses who have joined us this afternoon. We've had lots of great discussion. There is a lot more to consider as we work on pulling together our report on the oil and gas emissions cap.
At this point, witnesses, if you would like to drop off the call, you're welcome to do that. If you have additional thoughts, please send those to us through the clerk.
For the members, both online and in the room, if you could stay with us, we have some brief business to deal with. We need to elect a new vice-chair, based on the membership of the Conservatives.
To do that, I need to turn the chair over to the clerk, who will oversee that part of the process.
I don't know now what I'm dealing with. If the question was about Russian oil and gas exports to Canada, I'm in agreement. If we're going to go further and ask for all of this, that and the other, I'm not necessarily keen on that, because that's going to take more time.
I'm very keen on a hard date. I want to know.... If we're dealing with the crisis that we're dealing with, and there is reason for us to make a statement on this, then the sooner we know, the better. I'm not all that keen on adding a whole bunch of other stuff, because that puts the date back, possibly, and puts more work on us.
I think we have a nice, simple message. I would like to go with that, and I'd like it to say we should have it by next Monday, if possible. We understand if the Library of Parliament can't, but I imagine they can get us that information.