Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 21, Evidence, October 21 meeting
OTTAWA, Tuesday, October 21, 2003
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 6:05 p.m. to examine and report on emerging issues related to its mandate (Implementation of Kyoto).
[English]
Ms. Josée Thérien, Clerk of the Committee: It was moved by the Honourable Senator Buchanan that the Honourable Senator Christensen serve as acting chair until the end of this meeting. Is it agreed?
Hon. Senators: Agreed.
Senator Ione Christensen (Acting Chairman) in the Chair.
The Acting Chairman: Honourable senators, this meeting is now called to order. We have with us today Senators Finnerty, Senator Merchant, Senator Spivak and Senator Buchanan.
We have before us our witnesses from the Delphi Group, Michael Gerbis and Melissa Creede. As you know, we are doing a study on the Kyoto implications and how we can best implement it and meet our One Tonne Challenge. We have heard a number of witnesses and we have done some travelling to hear presentations across the country. We are certainly looking forward to your presentation tonight. Please proceed.
Mr. Michael B. Gerbis, President and Head of the Clean Energy Business Unit, Delphi Group: Thank you for inviting us. We think that, given the breadth of experience that our company brings to the table, we can provide you with some valuable insight into this issue.
The biggest challenge in preparing this presentation was coming up with the title. Typically, I talk to private industry and we talk about unleashing the challenge the potential of the climate change technologies or dealing with the risks of climate change and so forth.
I think that climate change is about action. It is not necessarily action such as transforming the whole economy to one based on hydrogen. It is about step-by-step action. It is about taking action, and small actions mean a lot.
I thought it was pertinent to talk about tackling climate change one tonne at a time. I was asked to provide an overview of climate change with from industry's point of view. I wanted to give you a perspective different from that of the large players — the large emitters, the ones who talk about risk. I want to give you a perspective from those who can provide the solutions: the solution to climate change and the solution to energy efficiency and to providing us with clean energy. I will take a positive, rather than a negative focus here.
I will give you a profile of that industry and what they will do to leverage that opportunity and give you an understanding of the positive business impacts that tackling this issue can have. I will then touch on the One Tonne Challenge and tie it all together in how those solutions can also help individual Canadians deal with this issue.
I thought I would start my key messages. First, climate change represents a significant opportunity. It is not just a risk that we all hear about but it is an opportunity — economically, socially and environmentally. I will touch on that shortly.
The second point is that we have the innovation in Canada — the knowledge, the technology and the capacity — to tackle this issue. We do not have to necessarily go abroad, although it would certainly help us. Meeting the Kyoto Protocol is not insurmountable. We have to get unstuck, take action now and approach it in a different manner.
The results of that will be significant co-benefits outside the reduction of greenhouse gases only. Even if we do not go forward with the Kyoto Protocol, we should still pursue reducing greenhouse gases because the effort will result in a number of other benefits.
The most important thing relevant to this committee's study is that public engagement and empowerment are key. That is where the federal government can play a key role in empowering those people and giving them the tools to take action. I will touch on those issues.
The next slide shows Canada's action plan. As I mentioned, it is not just about Kyoto to industry in spite of all the negatives we hear. To the suppliers of technology and the people with whom we deal it is about the significant co- benefits to the environment. If you reduce a ton of greenhouse gases, you will reduce sulphur dioxide, nitrous oxide particulate, mercury, et cetera. You will provide significant environmental benefits.
There are also social and health benefits. A great example is the heat wave that occurred in France. If we had had such a heat wave and the blackout at the same time, we would have faced a significant challenge because our health infrastructure would not have been able to cope, just as France's was not able to cope during its emergency. That would be a significant risk.
I will move away from the negative and speak to the positive part, including economic opportunity. We have tremendous export potential growth and climate change just simply adds to that with the ability to enhance productivity, competitiveness and innovation in Canada.
I will give you some perspectives. For technology suppliers, climate change represents an opportunity in the range of $275 billion to $350 billion per year. That is what the global market is and that is a conservative figure. Many would say that it is greater. However, it is growing and estimates range between 5 per cent and 10 per cent. To give you a perspective on this, the U.S. energy market is only $350 billion. The clean energy side is about $6.5 billion to $8 billion — some say $10 billion in the year 2000. However, that will grow to $80 billion or $90 billion. There is significant opportunity.
There is also an opportunity for our supply capacity. We often forget that the environment sector in Canada is a huge part of our economy. This is an enabling sector that not only addresses end-of-the-pipe problems and costs companies money, but also allows them to be more productive and competitive.
Currently, there are 6,400 companies in Canada in the environment industry umbrella that employs more than 225,000 people. When we break that down into climate change, the range is between 600 and 1,000 companies. Generally, these companies are very high-tech oriented and have a strong R&D capacity. We estimate that that is adding about $3 billion to the economy and about 23,000 jobs. It is not a small sector.
The companies are also quite diverse. We are not only talking about energy efficiency technologies and clean energy technologies. Climate change solutions cut across all sectors. They include intelligent building systems and advance materials such as lightweight engines and materials in cars. They include IT companies that modify traffic systems to ensure that idle time is reduced, which in turn significantly increases the efficiency engines and reduces greenhouse gases. They also include biotechnology firms and others.
We are seeing a huge convergence of these technologies to come up with innovative solutions. One example comes from a company in Quebec that has developed a laser that measures the moisture of logs. So what? When you know the moisture content of logs, you can optimize the beehive production significantly, thereby reducing energy use and significantly reducing greenhouse gases.
Different approaches are tackling the issue and some of these technologies are unique. They offer an opportunity that we can leverage and cause a new industry sector to grow. They also have strong R&D that includes merging technologies.
Where are we strong in Canada in respect of the climate change front and technology? It matches where we are strong on the supplier/resource side. We are good at IT and high-tech solutions; oil and gas production — up and downstream; increasing efficiencies of refineries; transportation; resource industries such as mining minerals and forestry; clean energy solutions such as small hydro; and even traditional clean energy solutions such as fossil fuels and enhanced boilers.
On the residential side, we are also rapidly advancing in niche solutions for the transportation area. We all hear about the fuel cells but we also have ample supplies of natural gas and bio-diesel. In residential homes, we have everything from R2000 construction in design to windows, to unique solar walls, which GM introduced in their Oshawa plant. That saved them a tremendous amount of money. There is also HVAC — heating, ventilation and air conditioning systems — the guts of the building.
On the next slide, I have shown some examples of these innovative technologies. A number of these are emerging in that they are jumping the technology forward. ATS Automation is a solar manufacturer that has developed a new compound to make solar panels from a thin film of plastic membrane. They make them out of silicone balls. That means you could cut a Canadian maple leaf out of the material and it could become your solar cell. You could stick it on your backpack and charge your battery as you go. It is unique. There is Zyplex, a company under Dofasco, is creating a new, advanced material — lightweight steel — that will revolutionize the auto industry in terms of reducing weight and increasing efficiency. Those companies are meeting this challenge and there are a number of others doing so also.
Can we meet our Kyoto commitments? The answer is, simply, yes. In fact, we could go farther without decimating the economy as people have suggested. However, certain things must happen. Industry needs strong leadership and direction from the federal government. Corporations base decisions on risk and if you do not understand the rules and the framework under which you operate, your risk is enhanced and you do not take action. The framework is set with Kyoto. It cuts their emissions by a certain amount and within a certain time frame. Industry will react because they always have reacted with respect to the environment. The solutions exist.
We need to take action now. However, it needs to be innovative and to be able to spur private investment and innovation. It cannot be about programs all the time. Of the $2 billion, $1.3 billion has been allocated, with much of it going to programs. Some of those are good but we need innovative mechanisms to get the money to the people who are taking the action.
Public education, engagement and empowerment are key. Industry has been doing a great deal and they continue. There are many initiatives, such as the voluntary challenge registry. Many companies are doing good things. Now it is time for the public to engage and do its part.
With respect to the One Tonne Challenge, I want to emphasize four key messages. To make this work for the public we must keep it simple. Look at the title, ``One Tonne Challenge.'' People do not yet understand what climate change is. It will be difficult to explain what ``One Tonne'' means. If you told them that it means reducing their mileage in an average vehicle by about 10,000 miles — that is, not driving their car for a year — they can relate. If they know it will save $500 on a small business energy bill every month during the winter, they can relate. The message has to speak to the average Canadian; it must address things such as health, dollars, children, et cetera.
We have to make it easy. It is easy to say that we will shift to the hydrogen economy or we will make you buy more efficient vehicles, but if those vehicles are not there then it is hard for them to take action. Therefore, we need to be able to give them the tools and the options. If we have convenient mass transit, then people will likely take that. If it is not available, they will get in their cars.
Finally, we found that it is always good to mandate and empower, that is mandate or set the guidelines, give them the tools but then give them incentives. The key areas of focus are vehicle fuel consumption, energy efficiency of home, financial incentives, and give them the true cost of energy and water — which is not necessarily the federal government's jurisdiction but it needs to be there. California was a great example. When prices went up and they immediately reduced or enhanced their energy efficiency by 7 per cent without any mandate whatsoever. Price talks. There are many other issues with respect to that, and I understand that, and that is where the mechanisms come in to cover those parts of the population that may be more impacted.
Finally, the government's role is always to provide leadership and lead by example. As a communicator, the government has always been great in terms of helping to educate the public, letting them understand the benefits, and pointing to the opportunities or the mechanisms to do that. In so doing there will be a facilitator change and, we hope, a stimulator of innovation.
Senator Spivak: I wonder if you could elaborate a bit more on businesses. One of the ways of selling this to the government and the business leaders is to talk their language. There are 6,400 firms. What percentage of the economy of Canada is that? In terms of the two — the climate change and the clean energy — what is that?
Mr. Gerbis: The numbers for the environment sector vary. Usually, you hear that about 2.1 per cent to 2.4 per cent of GDP comes from the environment sector. The challenge is just simply defining that. For example, is Bombardier a climate change solution or not? Well, its high-speed rail is, its ski-doos probably are not.
Senator Spivak: Compared with the forestry sector — which is not a big sector of the economy — it is a big sector of exports, right?
Mr. Gerbis: That is right. That is the same with the environment sector, which exports about 85 per cent of its goods and services.
Senator Spivak: What percentage is the forestry industry? Do you happen to know?
Ms. Melissa L. Creede, Vice-President and Head of Climate Change, Delphi Group: I do not know the exact figure off hand, but I do know the environment sector is comparable to the forestry sector and some of our other industries that we think of as very important in Canada.
Senator Spivak: That is right. I know this because when you talk to people they would never compare that, so that is a good selling point.
Can you elaborate on some of these companies? You went over them briefly. You have listed a few companies on your slide. Can you tell us what they do? Could you get into a little more detail for us?
Mr. Gerbis: Some of them are a mix. Stantec Global Technologies is one of the largest consulting firms across Canada. They picked up a technology called EPSOP from a small firm called Goodfellow Consulting. This technology optimizes the efficiency within electric arc furnaces for the steel industry. It has had a significant reduction — I believe the range is 10 per cent to 15 per cent — of sulphur dioxide, nitrous oxide and GHGs, energy use and so forth.
Lightyear Technologies is a nanotechnology company that is developing a wide range of applications. Nanotechnology comprises very small — at the molecular level — materials that can enhance storage of hydrogen and enhance efficiencies of chemical reactions. My understanding is Dupont or Dow now have a micro-reactor down in the United States where there are individual atoms or streams coming together to react to formulate pure chemical product. Most chemical plants deal with the waste. It is not to deal with the product you are trying to generate.
Powerbase is a company just out here in Arnprior, which has developed an information technology controller that optimizes small hydro systems remotely. They currently have a big project in China where they will remotely hook up 150 small hydro sites, optimize them, and enhance their efficiency by 20 per cent. They can do that automatically from a remote station. They are also trying to do that to other clean energy.
IOGEN Corporation is based here in Ottawa. This company converts cellulose material from corn stock, wood waste, and so forth, into ethanol — which is a ``greenhouse-gas neutral'' — that you can then burn in transportation vehicles and so forth.
Ms. Creede: Many people know about ethanol being created from corn in the U.S., for instance. IOGEN uses waste agriculture such as cornhusks and so forth. There has been a lot of controversy over growing corn to create fuel. This is something different; it uses the waste.
Senator Spivak: We heard about that in Washington. That means through the life cycle you are reducing the energy, whereas perhaps when you are growing corn you might not be reducing the energy.
Ms. Creede: That is right. You are also diverting cropland to create fuel, which has a lot of controversy around it, and it is not the best use of our land.
Senator Spivak: Right.
Mr. Gerbis: DELCAN is a large transport and wastewater firm. They are a multi-disciplinary company. One of the unique things they have come up with is a traffic management system — again integrated. It is based on IT technology that helps to manage an entire city or community with respect to its lights and so on, to get traffic moving and reduce idle time.
Senator Spivak: There are companies such as ZENON and Stuart Energy. How are they being subsidized? The government gives huge loans to Bombardier and they subsidize the oil and gas industry tremendously. What are they doing here?
Mr. Gerbis: They are taking some action. There are some good programs such as TEAM — Technologies Early Action Measures — that has been re-funded by the climate change dollars. It helps demonstrate climate change technologies, domestically and internationally. They have a program called the Wind Power Production Incentive, WPPI, that supports the installation of wind power technologies that cost about 1.7 cents per kilowatt hour.
We have the Federal House in Order, FHIO, program, which is trying to purchase 20 per cent of its energy through green power, or clean energy sources. Therefore, there are a number of programs and initiatives that are helping the industry.
I am not an evaluator of the program, so I cannot tell you specific programs, but industry keeps saying they need more than just the program. They need us to provide the mechanisms that will allow them to develop the projects and not just take the money and do one site and that is it. The industry does not want to become a welfare recipient.
Mr. Gerbis: Yes. Climate change technology companies are looking for an even playing field and in some cases, to be frank, an advantage. That is because we gave these other sectors an advantage in the past.
Senator Spivak: Do you have material that compares what government is doing for the old industries and what they are doing for these industries? That would be very helpful to us. I know it is not just about the One-Tonne Challenge; however, it would give us an idea of whether the playing field is balanced or unbalanced. It is also very good talking material. It is better than saying you have to do it because it is morally right.
Mr. Gerbis: Sure.
Senator Spivak: Could we get that in writing? Thank you.
Ms. Creede: I would like to add that there is a difference also between emerging technologies that are in development stage and need assistance getting off the ground and what the majority of our solutions are: the incremental changes to existing products that become better and better. We become leaders in those areas because our sectors are already leading.
For instance, in the forest sector we have excellent efficiencies within our pulp and paper mills, because we have developed those over the years. They are exporting that to other countries, not because they came up with this brand new technology out of nowhere, but as a result of many years of improving what they had. That happens in all our traditional sectors — the auto industry, the forest sector et cetera.
The oil and gas sector is an excellent example. They have developed many technologies to improve efficiency, to reduce methane loss, greenhouse gas recovery and that kind of thing. It is all just evolution through time for their own benefit within their own company.
We have many solutions there. While they may not stand out like the Ballards of the world, which took the world by storm with hydrogen, they have evolved over time.
Senator Merchant: I am interested in the One Tonne Challenge, because this is what we are dealing with. This is the challenge the government has issued to Canadians and there is a certain amount of money committed for this purpose.
I think taxpayers will want to have some means of measuring, perhaps, whether this program is working. Do you know how engaged Canadians are in this process? Do you find that people are really aware of the One Tonne Challenge that they are talking about it? What is your perception so far?
Mr. Gerbis: I would say that the knowledge level about the One Tonne Challenge is probably quite minimal. To be frank, government departments are only starting to roll out their communication programs. With respect to climate change, I would say you have seen an incredible takeoff in understanding — or at least awareness — of climate change. That happened a lot around Kyoto ratification. In fact, that debate between nay-sayers and yea-sayers was fantastic for the public. Articles in our newspapers probably tripled, if not quadrupled, and that is good.
Going forward, there is a challenge in engaging the public. Individual citizens have to deal with enough on their plate already. That is why we have to keep it simple and engage them and empower them. There are lots of ideas that are working well in other countries or other jurisdictions.
Ms. Creede: There is also a bit of a misconception among citizens that it is an industry issue and that industry is the only polluter. However, industry really only represents about one-third of the emissions. Most Canadians — partly because they do not really understand and partly probably due to a little reluctance to take on any of the blame — do not relate it to their individual actions. We need to work on that. As Mr. Gerbis said, they have other issues that are more pressing and it is something very conceptual and very intangible. We must try to make it something that is relevant to them, through things like relating it to child health and so on.
Mr. Gerbis: We have initiatives with Scouts Canada. We came up with a concept that both the federal government and a number of corporate members are sponsoring. We look at climate change through games, activities, events and so forth. For example, look at the blue box: the concept has been around for years, but it took a long time to engage the public. Those types of ideas that talk simply and engage the younger population or all aspects of the population seem to work to get them thinking.
Senator Merchant: When we were in Washington, I heard that the blue box concept is working very well. I know that it is not working in my own neighbourhood. They are very few blue boxes. However, where I live, we also pay a small fee for the collection of the newspapers. I have found that, in some cities, that is factored into the municipal taxes. That is an automatic deduction from their taxes.
Maybe that is one way that you can implement some these programs. I agree that people have a lot of things that are more pressing to them. Often their awareness of climate change is quickly forgotten, because other issues come to the forefront. It will be difficult to engage people on a continual basis.
Senator Finnerty: Following what you are saying, we need to educate the schools more, so the children can bring it home and talk about it. I know that we are getting inserts in our electric and gas bills that talk about savings. It is the first I have seen in the last few months and I thought that was a great initiative. My son was looking at all our lighting in our living room and kitchen, and said, ``Why do we not go for ordinary bulbs rather than the fluorescent ones?'' I never even thought of doing that. I think it will save a lot of money.
Are there any particular government policies or regulations that are getting in the way of the companies realizing their potential?
Mr. Gerbis: I think there are a number. The answer would depend on whom you ask. For example, some sectors will talk about the void in funding around demonstration or the role that government plays as a first user and how important that is in the defence, space or aeronautics industries. However, we do not see that translated into the same facilitating mechanism in other sectors such as clean energy or climate change. Some programs seem to be swaying a little bit that way.
People will always talk about the unlevelled playing field between the traditional energy. When the nuclear industry receives subsidies in the range of $175 or $183 million a year and the environment industry does not even receive support at the association level to the point that the association is actually collapsed, that is not a good message. Another example would be in respect of getting credit to do R&D for these technologies and not getting the same write-offs as others. Again, that is slowly changing.
There is nothing wrong with taking a leadership stand and saying, ``You know, there is nothing wrong with giving these companies or this group of companies or sector an advantage rather than a level playing field.'' We did that before with oil and gas, and natural gas and nuclear power. We are talking about a new economy, a less carbon- intensive economy with less air pollution. If we are trying to drive our industry there, there is no problem with direction or leadership to try to point us that way. It is simply a transfer of dollars.
I still remember when personal computers came out. Everyone was talking about how this industry was going to wipe out jobs in business, et cetera. We changed, and it is simply transferred the economy. The money went elsewhere and we grew an industry that is extremely strong now.
We have to stop looking at the negative and start focusing on the positive attributes. It is not about putting us at a disadvantage competitively. In fact, if it is done correctly, tackling Kyoto will make our industries more competitive on the international front and it will open up new doors for exports.
Ms. Creede: Everyone always talks about the cost of environment, but when you have a cost, someone is benefiting from that cost. The companies that we have mentioned will get the money. One company may have to pay, but another company receives. As Mr. Gerbis said, it is a transfer where the money is spent. It is not new money; it is just transferring purchase of technology.
Mr. Gerbis: I am not saying these are the solutions, but these are some examples of things I have heard from people talking. They could be as complex as stating that any federal dollars going to infrastructure for provinces and municipalities are only given should the issue of mass transit and energy efficiency be taken into consideration. Perhaps the fuel tax that you pay on your SUV should be transferred to the person who invests in an electric vehicle. Those are tools that allow people to take action.
Ms. Creede: As Mr. Gerbis mentioned earlier, even simply charging people the true cost of energy or water changes our behaviour. There is a reason that energy- and water-efficient washing machines and dryers exist in Europe. It has become the norm because of the high costs of both energy and water. You cannot even go into a store and buy a non- energy efficient or non-water efficient washer. We have always given a false sense of what energy costs, it does not change what technologies we buy and it does not change our behaviour. It is not even necessarily putting a premium on it; it is just charging true cost.
Senator Finnerty: What is a solar wall?
Mr. Gerbis: That is a very simple technology. I am astounded that it has not taken off. I am not sure if it is aluminium, but it is like an aluminium cladding. They have one out at the CANMET facility, which is under NRCan in Kanata, and the GM place has one, I believe, in Oshawa also. It is a flat siding with holes drilled in it, and it is brown or black. There is a gap between the wall and the cladding and all it does is simply heat that air up. When the temperature increases, the air rises, and there is a slot at the top and the hot air goes into the building. It is phenomenal. We are exporting it all over the place to dry fruits and vegetables in developing countries.
Senator Finnerty: Are we not using it here?
Mr. Gerbis: There are a few companies using it here, but it has not taken off. It is not really cost-prohibitive at all. It requires just a different way of thinking. It is just like biotechnology — a lot of people are stretching to figure out how to use it. They do not see the value and then it will click and boom, the leaders are off and running with it.
Senator Finnerty: Can you use it on a regular home?
Mr. Gerbis: I am not sure if you could, but I certainly do not see why not.
Ms. Creede: I think it works best in areas where there is a lot of air intake and air turnover. In your regular home, you would not have that so much; but in a plant, most of the cost is heating the air coming in from outside — winter or summer. In the summer, it works the opposite actually. However, in a home you would not have enough air turnover probably to make it worthwhile.
Senator Kenny: I have a question about something Senator Finnerty said. I was not sure if I heard your preamble about your son coming through and suggesting that ordinary bulbs would be more efficient than florescent. Is that in fact the case?
Mr. Gerbis: No, usually florescent lights are more efficient than the regular ones.
Senator Finnerty: What about the pot lights that you put in? I guess they are not florescent.
Senator Kenny: It is possible to get florescent lights that fit into the old kind of sockets. I think those are very expensive, but they probably pay for themselves over time.
Senator Finnerty: He read something that said we should change all our lights, and we have about 40 of them in our residence.
Senator Kenny: I just was not sure what you meant by ordinary bulbs.
Senator Finnerty: An ordinary 60-watt bulb would work in there too, but they look terrible.
Senator Kenny: But that would be more expensive than a florescent bulb, is that correct?
Senator Buchanan: Some of those little florescent bulbs last 50 per cent longer, I think.
Mr. Gerbis: Typically florescent bulbs cost more, but they have an extremely long life and they use much less energy.
I suggest that you look at a new technology called light emitting diodes — LEDs. B.C. Hydro has just installed them in their building. They are fantastic little devices for streetlights, lighting and so forth, with 90 per cent less energy use. I am not sure if that is compared to florescent or incandescent, but they give very good light. In fact, people are saying it is even better than florescent. In an office, some people get tired under florescent light. These are very bright, and they are based on a high-tech solution, something to do with electrons emitting light when they move orbit or something like that. It is quite high-tech.
The cost right now is high; the payback is seven, eight years or something like that. However, I think we have to change that paradigm also. It is okay to enhance the efficiency of a building by 30 per cent with a payback of 10 years, because buildings usually last for 40 to 60 years. That is another hurdle industry must get over.
The Acting Chairman: You were saying that it is difficult for somebody to visualize and to get their minds around the One Tonne Challenge. It seems to me it is a nice masthead, it is sort of sexy — a One Tonne Challenge seems like something really big. It seems to be an excellent opportunity to build on that, when putting out your promotional stuff, by listing all the different things you can do to achieve that One Tonne Challenge. Suddenly, they say, ``Boy, I can go one ton and yet this is all I have to do to do it.'' Would you agree that the masthead of One Tonne Challenge is good, but we have to build on it?
Mr. Gerbis: I am not a marketer for public advertising, but I think the key is that you need to link that message to something they understand.
The Acting Chairman: It would seem to me, in schools, you can make a One Tonne Challenge into a competition for kids, and then they have to work it out. They can take it home and say, ``Mom, this is what we can do.'' For example, with the hazardous wastes and that sort of thing, getting the children in the schools aware of those things and having them go back and get under the kitchen sink and in the bathroom was one the best ways to get people involved.
Mr. Gerbis: I taught university and college for a number of years, and we talked a lot about waste reduction at the time. They could never make the connection. They always thought one can does not do anything. It was only when I made the connection of one can per day times 365 times. I brought in one month's worth and showed them. Then they sort of went, ``Oh, yeah, okay.'' Then I took it out to a year and said, ``Okay, if you do that for a year, it fills the whole room.'' Kids do not even know what one ton means, but if you say that it equals 100 of their friends stacked together or whatever, then they would understand.
The Acting Chairman: How do you see measuring the results of the One Tonne Challenge on an individual basis?
Ms. Creede: It is definitely a challenge. For the Government of Canada to use it in their Kyoto commitments, it has to be something that they can quantify and verify. Ways that they will do it will be through transportation on public transit and reduction at landfills or reduction of organic wastes at landfills and so on. However, it will be a challenge. At the end of the day, if we get everyone to do it and we do not capture it all, yes, it is bad for our Kyoto commitment, but it is good for all the other things. Even if they are doing things on their own that we cannot really capture, obviously, it defeats the purpose of Kyoto, but it reaches the same goal anyway. There will be some measures related to transportation, waste and energy use. Those are easier things to measure and quantify.
Mr. Gerbis: One way you can do that is by going upstream. Consumers Gas knows how much they are sending to their population. You will not necessarily see a reduction, but you might see a reduction per household or per individual. You will have to take degree-days into account. If you have a cold winter one year and a warm the next, you will see a decrease, but that does not necessarily mean increased efficiency.
The Acting Chairman: You can measure efficient new cars that are sold and equipment and washers and dryers and all that sort of thing.
Some companies certainly have taken on the reductions and have found it to be economical. Yet, similar companies are not doing that. Can you explain this? Is it just bad management, or are there reasons that some companies embrace this as an opportunity while others see it as a negative?
Mr. Gerbis: Waste reduction is a cultural thing. When you have to change, whether you are introducing a new computer system or you are trying to change the way you manage energy or waste, it takes some time for many people to catch on.
A while back, I saw that the leaders who had, for example, good waste reduction programs also had good health benefits, good union management relations and good social responsibility. Those leaders tend to be thinking about new things and turning them into an opportunity, while the laggards are always looking for an excuse.
The Acting Chairman: How could we tap into those leaders so we can pass this on to those who are not following quite as fast?
Mr. Gerbis: Promoting the voluntary challenge registry and promoting that industry is doing a lot of good stuff. Dofasco and its steel counterparts reducing its energy by 1 per cent per year over the last 10 years and their commitment to do so for another 10 years, is a good story. Dofasco uses a lot of energy relative to homes.
Ms. Creede: There is another issue that comes into play. Depending on the sector, they may have already been hit with many different regulations in the past five or ten years. For example, the forest sector used to consume this much energy, and now they are here. If they have to reduce even more, it is very difficult to go even lower than where they are already because of other regulations unrelated to Kyoto.
There are two factors there. What other kinds of regulation have they had to meet in previous years where they may have already taken away what some people call the low-lying fruit? They may have already done the easier things and it is very difficult for them to go another step. The second issue is related to where they are in the life cycle of their capital purchases. For example, if something like a boiler has a 20-year life cycle and they replaced it four years ago to comply with another regulation, they will not see the remaining 16 years on that boiler if they have to do something now. Whereas another industry or company may already be at the end of that boiler's lifecycle and replacing it actually benefits them because they have a more efficient technology and the monetary gains outweigh any problems.
There are so many issues by individual company and by sector. That is partly why some of them are more resistant. They may have been hit repeatedly and then they have to take yet another step without realizing the initial investment they have already made.
The Acting Chairman: There could be a government program in place to compensate those who lose the 16 years remaining in their investment if they replace the boiler sooner.
Mr. Gerbis: That is a great example of a financial mechanism that would resound well with industry. You could change the capital cost allowance. I am taking a guess here, but I think a boiler has a 35 year write-off, and if suddenly it were 20 or 15, then reinvestment would occur faster, and new technology and innovation will occur. They will recognize that the can write it of without stranding their asset and they can invest in a new, more efficient technology that will save them each year with a quicker payback.
The Acting Chairman: The government does not lose any money in the process. Everyone wins.
Senator Buchanan: You mentioned electric arc furnaces. I have always been interested in electric arc furnaces.
When you talked about electric arc furnaces, were you talking about reducing energy or saving energy? Through what mechanism would it occur?
Mr. Gerbis: I do not know the details of this technology, but I understand that the control technology monitors the influx of raw materials and adjusts things so that the amount of electricity used is optimized.
Senator Buchanan: I read something about that. As you know, the load in an electric arc furnace is scrap. I read that you could reduce the use of electric energy in an electric arc furnace. I think different kinds of scrap and different loads of scrap at different times would reduce the use of electricity. Is that what you are talking about?
Mr. Gerbis: I am not positive, but I can certainly pass on more information. We have some information I can show you, if you are interested.
Senator Buchanan: You were talking about Dofasco. Is it involved in that?
Mr. Gerbis: I believe they have installed that technology, but I am not positive. Dofasco is the leader.
Senator Buchanan: If Sydney Steel were still operational, they would be the leaders in saving energy in the electric arc furnaces, but it is gone now.
The Acting Chairman: We have heard from a lot of witnesses — especially down in Washington — about the hydrogen cell. What do you see in the short, middle and long terms on hydrogen as it is developing for the energy reduction of our greenhouse gasses?
Mr. Gerbis: To which aspect are you referring over the short, medium and long term? The technology?
The Acting Chairman: The technology to develop it so it can become something that is commonplace rather than something that is still leading edge.
Mr. Gerbis: I may have a different view than many people on hydrogen, but I do not believe hydrogen should be considered the panacea. We seem to have picked this and believe this is the panacea, and we are flooding all kinds of money at it, which is giving it an advantage to other technologies. That might be okay in the end, but there are still many challenges with hydrogen. We still make it out of fossil fuels. When you put in the reformulation, the storage and then the actual use, the efficiencies are not as great as are being quoted. The fuel cell can reach 50 per cent to 60 per cent efficiency, but that does not include having to compress it and store it. You have had to reformulate the natural gas. Again, you have to be careful with the numbers and how they are spun. All kinds of different studies have shown, for example, that if you took natural gas and burned it in a natural gas engine or put it through a fuel cell, the efficiencies could be quite close —sometimes even reduced. Will that change? Sure, because we are flooding so many dollars into it.
Second, this would involve a major investment in infrastructure. However, there are many benefits of our existing infrastructure that can be built on, such as transportation lines and natural gas use — although supply and demand of natural gas is another issue that raises concerns.
What is interesting is if we start to look at hydrogen developed from renewables. It is expensive now, definitely. There are things like biomass; solar is expensive. Using hydro off peak to generate hydrogen to store later, is an interesting approach. However, it should not be the panacea. We should not be putting all our resources in one basket.
We should also be looking at some of the environment-related issues, such as if 2 million cars are driving across Toronto, minus 20 spitting out water vapour — which they do now but it will be more — you could have a challenge. Water vapour is a greenhouse gas. People are looking at that because they are considering recycling.
Ms. Creede: If we do get to the stage where hydrogen is created from water — and we will eventually — and we have water crises around the world, should we be using water to create fuel? It is not as much of an issue in a stationary fuel cell because they can capture the water, reuse it or do something else with it. In a mobile system, such as a car, it would be difficult to come up with a system that fits within a car to do all that. You would fill up the car with hydrogen that has already been created.
As Mr. Gerbis said, there is the issue of water vapour. It is a greenhouse gas; it raises humidity levels. There are so many issues. If cars all around the world are using hydrogen, that is an issue. With regard to stationary power systems, it depends on where they are located.
I am personally concerned with the issue of using water because it is already in a crisis situation in most places in the world. It will become so in the developed world as well.
The Acting Chairman: Where I come from, ice fog from furnaces in the wintertime is a major problem. I can imagine if we had fuel cell cars we would never find our way down the street.
Ms. Creede: There is no one panacea. We will need energy from all kinds of sources, doing it in a logical and comprehensive way. It you makes no sense to ship natural gas around the world. To use natural gas in an area where it exists makes sense. To use hydrogen where in an area where it is easily created makes sense. It is difficult in a global economy because cars are all standardized around the world. They all use the same kinds of gas tanks, et cetera. Thus, it becomes challenging. If we really wanted to solve environmental issues and use energy in the most efficient way, you use what exists in the area where you need it rather than shipping it.
I also have a fear about hydrogen being considered the answer to everything. Not only is it not the answer to everything for many other reasons, but it also creates new problems when you have to ship it to areas that do not have a way to create it or store it.
Senator Kenny: I do not follow the last answer. What does shipping have to do with anything? Why would you not let price determine it? If you are shipping natural gas into a market where it becomes the least-cost fuel, what have you got against that?
Ms. Creede: I am not saying it is necessarily the wrong thing. It creates other challenges. It creates systems where one country becomes reliant on another, where they may have a type of fuel that exists in their economy. Perhaps they have a lot of wind and they are not tapping into it and they are buying natural gas from other places when they could be tapping more into what they have.
Senator Kenny: Why would they do it if it were not cost effective?
Ms. Creede: For all the reasons we talked about before. The playing field is not level for the new technologies coming in.
Senator Kenny: I understand that. The consumer alone cannot level the playing field. In the meantime, should they not go for the least-cost energy option?
Ms. Creede: I agree with that. Over the long term, if we are looking at a sustainable energy economy — over the next 50 or 80 years — we have to look at all options for energy, not just that one.
Mr. Gerbis: With regard to the least-cost based on our economic system and how we measure it now, nuclear can look least-cost, if you do not include the capital cost of the plants in the projection.
Senator Kenny: I think you have to include the capital costs in the projection.
Mr. Gerbis: It is my understanding that nuclear plants have no liability in Canada.
Senator Kenny: That is not true either. They have some liability, but in the view of this committee not enough.
Mr. Gerbis: I am throwing out examples of least-cost, depending on how you measure it. There are air quality issues and impacts to the environment. You have to consider how many asthma cases will come into emergency, and so forth.
Senator Kenny: I do not think anybody around the table disagrees with full-cycle costing. We all agree with the principle. Having said that, I do not think anybody around this table thinks that full-cycle costing will come in the short term.
Ms. Creede: I was talking 50 to 80 years down the road. In an economy, if we want to plan for something where energy is the most efficient and the most environmental and sustainable, my only point was not to look at only one. There are many options depending on where they come from.
Mr. Gerbis: A key issue now is security. When you import any type of fuel, that is a concern. You are reliant on a source that is outside your control. That is where distributed generation in a variety of options — including coal, nuclear, solar and wind — gives you greater security in terms of generation. You are less likely to be hit by drastic increases in one type of fuel or problems with another, et cetera.
The Acting Chairman: From the discussions we have had thus far, I take it that you are saying that we are really looking at a basket of alternatives for the future? We should not necessarily be looking at just one particular area, but at the options, at what is available and what can be developed as alternatives for our future, look at the areas and what is available and develop a basket of alternatives for our future instead of investing large amounts of money into one.
In you experience, what most motivates companies to take steps to reduce greenhouse gases?
Mr. Gerbis: With the large emitters, it is risk. There is the risk that they will be penalized for inaction. Savings, of course, come along.
The Acting Chairman: Would you say that risk is the number one motivator?
Mr. Gerbis: Yes.
The Acting Chairman: Would good enforcement legislation be a step in the right direction?
Mr. Gerbis: It is one alternative.
Domestic emissions trading is a great way to reduce that risk, as long as the framework under which it is developed is well laid out and provided to the industry. It is just like the framework that exists for the Toronto Stock Exchange. The framework is there and they can work it out among themselves. They have the rules. The companies need the direction, the rules and the framework in which to operate. The risk is then reduced and they can take their innovation inside to figure out how to get there and actually move beyond that.
Ms. Creede: Regulation is only one risk reducer. Certainty around government roles or certainty around where the trends in the world are heading reduce the risk as well.
The Acting Chairman: Thank you very much for being with us. We appreciate your input.
The committee adjourned.