Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 11 - Evidence - June 17, 2008
OTTAWA, Tuesday, June 17, 2008
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 33, An Act to amend the Canadian Environmental Protection Act, 1999, met this day at 6:15 p.m. to give consideration to the bill.
Senator Tommy Banks (Chair) in the chair.
[English]
The Chair: Good evening, ladies and gentlemen. Thank you for your patience. It is a pleasure to welcome you to the Standing Senate Committee on Energy, the Environment and Natural Resources, which is here to consider Bill C-33, An Act to amend the Canadian Environmental Protection Act, 1999. Before I begin, I want to introduce briefly the members of the committee who are present.
On my far left, the Dean of the Senate, the Senator from Nunavut, Senator Willie Adams; seated to his right is Senator Trenholme Counsell representing New Brunswick; to her right is Senator Grant Mitchell from Edmonton, Alberta; to his right is Senator Lorna Milne from Ontario. On your left is Senator Mira Spivak from Manitoba, Senator Nick Sibbeston representing the Northwest Territories and Senator Bert Brown representing Alberta.
Bill C-33 seeks to give the government power to regulate renewable content in fuels by amending the Canadian Environmental Protection Act. Appearing before us today is the Honourable Gerry Ritz, P.C., M.P., Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board. We also have before us Bruce McEwen, Chief, Fuels Section, Energy and Transportation of Environment Canada; and from Natural Resources Canada, Victoria Orsborne, Acting Chief, Fuels Policy, Office of Energy Efficiency.
Minister Ritz, thank you for taking the time to appear before us today, and like wise, Ms. Orsborne and Mr. McEwen.
Hon. Gerry Ritz, P.C., M.P., Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board: I apologize for being late. We were wrapped up in the House of Commons. I thank you for your indulgence.
I am pleased to be here this evening to address the renewable fuels bill and its proposed amendments to the Canadian Environmental Protection Act, CEPA.
I respectfully urge you to move this bill forward for the good of our farmers, the good of rural Canada, the good of our environment, and the overall good of Canadians. If Bill C-33 does not pass before summer, the market that it creates with renewable fuel standards leading up to the 2010 deadline is at best horribly stalled. At worst, investment totally leaves and dries up.
I realize that you presented a couple of studies this morning on rural Canada and cost inputs for farmers, and I will talk to that point later in the presentation I make here tonight.
Projects going ahead will have an extremely difficult time finding investment to continue financing them. This lack of investment will weaken if not kill some of these projects. This industry, as you know, is only getting started. All the great projects coming online now or already producing also will be negatively affected if Bill C-33 stalls. The potential for exciting next-generation projects with new Canadian technologies and companies to drive them will be dead before they can even walk.
Two government programs will be disastrously affected if not totally killed as uptake in the government programs will no longer exist with no more outside investment and financing to keep them afloat: the $200-million ecoAgriculture Biofuels Capital Initiative, ecoABC, program helping farmer and rural community investments and the $500-million Sustainable Development Technology Canada, SDTC, next-generation fund commercialization of cellulosic ethanol and next-generation biofuels from waste products.
Let me highlight a number of projects that industry has told us will be adversely affected by any delay, individual projects that are well underway that will be hurt or will die on the vine. One is a next-generation project using municipal landfill waste and agricultural residues in Quebec worth some $100 million. A similar but larger one is located in western Canada worth some $150 million. An expansion of an existing facility in southwestern Ontario is in the $200-million range. Three new projects are being developed in Ontario, all with significant farmer involvement, to the tune of $400 million. A significant biodiesel project in the prairies is worth some $100 million. A major biodiesel project in Quebec is worth $50 million. The world's first commercial cellulose ethanol plant on the prairies, next- generation technology, using agricultural residues and leftovers from the forestry sector is worth $300 million. A cellulose ethanol project in B.C. using pine beetle wood and forestry waste is $100 million. A farmer-owned ethanol project in Saskatchewan is $100 million. A major ethanol project in the Maritimes is $100 million.
The total investment for individual projects is about $1.5 billion, plus the government programs totalling $2.2 billion of economic activity.
I put the question to you senators: Do you want to be responsible for the impacts of this delay? I know the vast majority of your colleagues in the House of Commons want this bill passed, as you do too. Will you be able to look your neighbours in the eye and tell them their community lost out on investments, good jobs and a cleaner environment because we, collectively as a government, failed to move forward in a timely fashion?
The health of the environment is one of the most pressing concerns of Canadians, as well as globally, and a priority of this government. The development of renewable energy has become a top priority for countries worldwide. Every nation wants to decrease their dependence on fossil fuels and move towards a more sustainable future.
The United States has ambitious goals for renewable fuels: more than 20 per cent over the next 10 years. That goal requires, by their accounts, approximately 21 per cent of the corn they produce. The European Union has set a 10-per- cent target to be reached by 2020, which will require 9 per cent of their production capability.
Canada is recognized as an energy superpower, and our ambition as we move forward is to be a clean-energy superpower. The production and use of renewable fuels means lower greenhouse gases, GHGs, than conventional fuels produce. It is estimated that a 5-per-cent renewable standard, as we are targeting in Canada, would contribute to achieving an annual reduction of 4 megatonnes in net greenhouse gas emissions, the equivalent of removing more than a million cars from Canadian roads. That is why the Government of Canada is committed to reaching an average of 5- per-cent renewable content in gasoline by 2010 and 2-per-cent renewable content in diesel fuel and heating oil by 2012, conditional, of course, upon successful demonstration of its use under a range of Canadians conditions. Given the winter we recently enjoyed, that successful demonstration will not be hard to perform.
The renewable fuels bill in our proposed amendments to CEPA will help us reach our target while using less than 5 per cent of our production capability. As you know, CEPA currently provides authority for the regulation of sellers, producers and importers of fuels.
The authorities we seek include authority to regulate at point of fuel blending, authority to track exports, and of course, there are many collateral industries, innovation and new varieties of grains. There will also be an exemption for small-volume producers and importers — economies of scale will prevail.
Chair, biofuels production will provide real benefits for Canada. A prosperous, vibrant, bio-based economy will create opportunities for Canadian producers to diversify their investments and create new markets for their products. Approximately 3 billion litres of renewable fuel will be needed annually to meet the 5-per-cent requirement of our proposed regulatory system.
Supplying net demand will be a big job for the biofuel industry, and I know they are up to the task. Canadian biofuel producers are already producing approximately one billion litres or a third of the target per year, and are making progress on meeting the 2010 goal.
The shift from conventional to renewable fuels has the potential to create new markets and economic incentives for Canadians farmers. Improved market opportunities and better prices for farmers are good news for all Canadian agriculture. They are also good news for the economy as a whole.
It is anticipated that increased investment in biofuels has the potential to create thousands of jobs in Canada, both the direct and indirect jobs resulting from meeting our mandate.
We have heard criticism that increased demand for grains as a result of biofuels production is causing food prices to rise, extra demands on land use and higher feed prices for livestock producers. Therefore, I appreciate this opportunity to outline the reality around these issues.
The recent rise in the price of grains and oilseeds is the result of many factors, such as increased demand for emergent economies, decreased production due to droughts and other weather-related issues in key grain growing regions such as Australia and Argentina and, of course, rising oil prices and transportation costs of those commodities.
Domestically, Canadian farmers already grow more than enough grains and oilseeds to meet our needs for both a fuel and a food line. The recent rise in wheat prices has increased the cost of wheat in a loaf of bread from 10 cents in the 2006-07 crop year to approximately 19 cents per loaf in the 2007-08 crop year.
Canadian grains and oilseeds trade on world markets at prices that reflect world supply and demand conditions. It is true that farmers are receiving better prices for their products, partially due to increased biofuels production around the world, and it is high time, as you well know, that farmers receive their fair share of that added value.
Again, I point to your recent Senate studies on rural poverty and input costs for producers, and the need for this extra stream for their product.
Improved market opportunities and better prices for farmers are good news for all of Canadian agriculture. Farmers work hard to feed Canadians as well as to provide a strong foundation for our economy. Farmers are the third largest contributor to our gross domestic product, with top quality sustainable foodstuffs. For these reasons, the Government of Canada is committed to ensuring our farmers benefit from higher commodity prices.
With respect to our livestock industry, increased ethanol production translates into more distillers grains, a source of livestock feed. Some 40 per cent of grain-based feedstock for ethanol is recaptured for use as part of a livestock finishing ration.
This government recently announced the full removal of kernel visual distinguishability, KVD, as a registration criterion for new wheat varieties in Western Canada. Moving beyond KVD will allow Canadian farmers to harness the potential of new higher yielding varieties of wheat tailored to biofuel production, new high starch and high yield varieties that have the potential to lower the acreage required for ethanol recommendations.
While renewable fuels from current technologies use grains and oilseeds and are already improving our environment and our economy, this government is looking ahead. We are investing in new technologies and innovations to help develop the next generation of renewable fuels. These investments include $500 million for the NextGen Biofuels Fund to jumpstart the development and production of the next generation of renewable fuels here in Canada. We are encouraging the production of technology that uses agricultural residue such as wheat straw and wood chips to produce renewable fuels. Cellulosic ethanol is among the most exciting of these developments.
Many feasibility studies under the $20 million Biofuels Opportunities for Producers Initiative, BOPI, are exploring the possibility of using non-food materials to produce biofuels. These projects include assessing the potential use of distillers grains, animal by-products and carrot and potato waste in the development of renewable fuels. These new technologies have the potential to generate even greater environmental benefits than traditional renewable fuels.
For those concerned about land use related to biofuels production, the facts here are clear as well. Under typical Canadian conditions, feedstocks needed and used to produce conventional biofuels come from land already used for agricultural commodities. In fact, current estimates are that only approximately 5 per cent of our production capabilities in Canada would be required to meet the proposed biofuels mandates.
Mr. Chair, a strong domestic biofuels sector will lead to benefits at all levels of the agricultural value chain. Exciting new-generation technologies will enable farmers to use agricultural waste as biofuel feedstocks and harness those new market opportunities. The core principle of Canada's approach to climate change is balancing environmental protection with economic growth.
The government, with your help, can ensure that Canada is at the leading edge of clean technologies to reduce emissions and adapt to environmental change. Protecting our environment for future generations is our responsibility, as well as our privilege as elected officials. We have backed our commitment to Canadians by taking steps towards smarter and greener energy. I thank you for your interest in this file.
The Chair: Ms. Orsborne, do you have anything to add?
Victoria Orsborne, Acting Chief, Fuels Policy, Office of Energy Efficiency, Natural Resources Canada: No.
The Chair: Mr. McEwen?
Bruce McEwen, Chief, Fuels Section, Energy and Transportation, Environment Canada: No.
The Chair: Before I go to questions from senators, I remind the minister and our guests that in this place, unlike the other, you do not answer questions through the chair. You answer directly to whoever asks you the question.
Senator Spivak: Mr. Minister, thank you for appearing. I have about three questions. The first question is on the acreage required.
According to testimony before the House of Commons committee, achieving the 5-per-cent and 2-per-cent goals would require 2.1 million acres of wheat, 0.9 million acres of corn and 0.8 million acres of canola. These numbers represent, respectively, 10 per cent, 33 per cent and 6 per cent of the seeded acreage of these commodities in 2006-07. I believe that was your testimony. Are those figures still correct?
Mr. Ritz: I am not sure where these figures came from. It was not my testimony. For Ontario alone, 2.1 million acres of wheat might be accurate, but Saskatchewan has 47 million arable acres used for wheat, canola or pulse crops production. I think these particular acreages and values you are talking about represent Ontario, if I am not mistaken.
Senator Spivak: What about the percentages?
Mr. Ritz: Again, you are talking about one particular province. When you average them out across the country, we are saying that less than 5 per cent of our production capabilities as a country meet a national target of 5 per cent.
The Chair: Pardon my interruption, but I think I may have misunderstood your question, Senator Spivak. Would you restate it? Was it not, how many acres are required to meet the 5 per cent?
Senator Spivak: Exactly: How many acres of cereal grains will be required to meet the 5-per-cent and the 2-per-cent goals?
Mr. Ritz: I am not sure that we can quantify that number. The problem is a little thing called weather.
Senator Spivak: I am talking only about cereal grains.
Mr. Ritz: According to the data that I have, it would take 4.2 million acres, which is about 4.7 per cent of the 90- million-acre total in Canada. That is how we arrive at the 5-per-cent number.
Senator Spivak: My second question is on cost benefit. You plan to spend about $2 billion in subsidies for producers. What is the breakdown between the subsidies for the biofuel plants and the amount going to farmers? How do you break down that figure?
Mr. Ritz: The $2 billion is not only subsidies. That amount is the complete package as to what we think it will take as a catalyst to further the market for the whole industry.
Can you repeat the second half of your question, please?
Senator Spivak: I want to know how much of this money —
Mr. Ritz: Is directed back to producers?
Senator Spivak: — is being directed to the plants? How much is going to farmers?
Mr. Ritz: It depends on the ownership of the plant. I have one in my riding owned by Husky Oil, which benefits producers in that they have contracts with Husky to supply the feedstocks to that particular plant. There is a benefit there.
I have a smaller plant of 25 million litres tied into the North West Terminal in Unity, which is wholly owned by producers in the area. They also contract to the terminal. They make use of the cleaning facilities of the terminal and different things. In that plant, farmers benefit 100 per cent because they have ownership of it. They are in the final stages of that one, and they are already talking about doubling it.
Senator Spivak: Perhaps we can have the exact breakdown by mail. I do not expect you to have —
Mr. Ritz: It would depend on each facility as to the benefits to producers. If producers have ownership of the facility, of course the benefit will be wholly theirs. They have a percentage of ownership and shares, and others are wholly owned, as I said, by Husky Oil.
Senator Spivak: Right: I still would like to know that breakdown.
I have two other questions. First, for first-generation production, which is in cereal grains, will those plants be able to change to cellulosic ethanol and ethanol from waste products?
Second, how long do you think it will take before we can produce cellulosic ethanol? The UN's latest meeting suggested it would take about 10 years. I am talking about commercial quantities capable of achieving these targets.
Mr. Ritz: The output today with the facilities we have online achieves about a third of our target, 1 billion litres.
Senator Spivak: With corn?
Mr. Ritz: With grain-based ethanol, such as corn and wheat.
Senator Spivak: My question is whether those facilities can be converted to cellulosic ethanol production, and how long it will be before cellulosic production is achieved without using grains.
Mr. Ritz: A company here in Ottawa called Iogen is running a pilot project. They are in the final stages of negotiations to build a commercially viable operation of some 300 million to 400 million litres near Prince Albert, Saskatchewan.
Senator Spivak: And one in the United States.
Mr. Ritz: Perhaps someone else is building one in the United States, but Iogen is not. They considered building one in Idaho, but they chose Saskatchewan.
Converting a grain-based ethanol facility to the new generation or cellulosic ethanol is not currently possible without new technology to break it down into a liquid state to finish it off. That problem is still being worked on.
The Chair: In the best scenario, in the next 20 years, what percentage of the total ethanol do you think will be derived from grain, other cellulosic sources, and other potential feed stock sources such as garbage?
Mr. Ritz: I will look into my crystal ball. I think that in the next 10 years to 15 years the vast majority of production will be grain based. At that time, other sources will come on stream. A number of pilot projects are working on other sources for ethanol or biodiesel using animal waste, et cetera.
With garbage use, there are ways to create energy other than straight ethanol or biodiesel. Most of the garbage is going into methane recapture; using it to create electricity with a turbine, for example.
The Chair: Are wood chips on the horizon?
Mr. Ritz: Absolutely: The Iogen example uses wood chips or straw. They have developed an enzyme that will break down that type of organic material and convert it into ethanol.
The Chair: Given that production will be grain-based, are you assuring us that grain-based ethanol will not create a big problem with food prices?
Mr. Ritz: No, it will not.
The Chair: Will cattle operators and livestock producers who rely on feed grains be okay?
Mr. Ritz: I will talk about food prices first. It takes less than 5 per cent of our production capacity in Canada to feed both to the full extent; the 3 billion litres and that line. Anyone who farms can tell you that the weather is a bigger factor than 5 per cent at any given time. We are becoming much more efficient with what we do. There is talk of new grain varieties coming on board. At the University of Saskatchewan, Brian Fowler, a crop scientist, has developed seven new varieties of winter wheat and soft wheat. These new varieties must be developed in the States; because of KVD, he could not do it in Canada. That situation is now changing. He is importing those varieties back into Canada. In some instances, they will give us 80 bushels per acre on dry land. As Senator Brown can tell you, that yield is good, and it is high starch, which we need for the ethanol varieties.
We are developing far better usage of our land. Our farmers are great stewards of the land. With zero till, direct seeding and those types of things, we are obtaining far more use of an acre of land than we ever did before.
I think we will see a big shift in the next little while, with agriculture starting to develop more than only food lines. As the United Nations has said, there is more than enough food in the world; it is a matter delivering it where it is needed at a given time. We punch above our weight on so many levels, and agriculture is no exception.
There is definitely no problem in us developing both lines and continuing to export, as we do with a top quality product. I have a lot of testimonials from flour mills around the world that talk about using 20 per cent of Canadian wheat and 80 per cent of someone else's to make better bread. Ours is that much superior and consistent in quality. We will accomplish the same with ethanol. We are innovative.
On livestock, there is currently a bit of a concern. I have received several submissions from the Canadian Cattlemen's Association and the pork producers. Everyone is in a bit of a crisis at this time with the cash flow situation. It has more to do with the high dollar and an oversupply due to bovine spongiform encephalopathy, BSE.
At the same time, they tell me that studies they have done comparing feeding a steer in Alberta with feeding a steer in Nebraska show that there is a $90 advantage in Nebraska. They can feed a steer $90 cheaper there. The access they have to that quantity of distillers grains to blend into their finishing ration brings the cost of their feed stocks down.
Senator Milne: Mr. Minister, you began your remarks today by citing a vast number of projects that will not proceed if this bill is not passed by the Senate right now. In fact, you threatened us by asking what our neighbours would think of us if we did not pass this bill.
Do the people behind these projects realize that the government has no specific regulations in mind for promoting this project? In my experience in developing regulations, it takes about a year before they are developed. How do you propose to work around that situation?
Mr. Ritz: There are a couple of questions there. When I talked about looking our neighbour in the eye, I was talking about the government in general, not the House of Commons or the Senate. We will all be perceived as not getting this job done.
Projects will be in jeopardy. Some may go ahead, some may limp and some may fold up shop and disappear because they will see that it will take time for this legislation to come through. It takes one to two years to build a facility. That will give us time to dot the i's and cross the t's, and so forth.
They are looking for assurance. The fossil fuel industry must embrace ethanol. They, and no one else, have the blending capabilities. That is why we talk about regulation for them to be blended at those facilities. That is what this bill will do. That is what they are looking at us to do.
It is fine for an ethanol facility such as Husky Oil in Lloydminster, which also has the upgrader. They blend right there because it is all on site. However, the small facility that I mentioned in Unity, Saskatchewan, the North West Terminal, cannot take the proposed 50 million litres they will develop anywhere to have them blended because the other guy will not do it. This legislation sets the stage for them to be active in the blending. That is the situation.
Senator Milne: Without the regulations in advance, they will not know what kind of facility they must build.
Mr. Ritz: We are saying that the 5 per cent and the 2 per cent are the minimums, and many of the provinces are higher than that. We are saying that 5 per cent of any gasoline we buy at any pump must be ethanol by 2010, and 2 per cent of diesel must be ethanol by 2010.
Senator Milne: I agree with you about the importance of ethanol from cellulose. How close is the government to supporting the research that will allow farmers to do such things as developing ethanol from wheat straw?
Mr. Ritz: Iogen has developed a facility to do that.
Senator Milne: We know about Iogen. We have had them here as witnesses.
Mr. Ritz: Farmers will supply that straw to them.
As to farmers having the capacity to produce cellulosic ethanol, although they would pay a royalty to whatever process exists, that is a possibility. I think the next generation of ethanol has not even been talked about yet. There may be things out there even better than cellulosic production.
Senator Banks talked about garbage. There is a mountain of garbage in every community. How do we make better use of that garbage? Facilities exist. We have addressed that question with a half-million-dollar fund through Natural Resources Canada that is available for innovative pilot projects. I believe that in the next 10 years we will see tremendous changes that will benefit us all.
Senator Milne: I know that many experts think it is much more energy efficient to produce either methane from landfill or fuel pellets from biomass to replace fossil fuels. If this production is much more efficient than turning seed crops into ethanol, why are you not doing something to help those producers as well?
Mr. Ritz: We are. I would argue that some are less efficient than others. There is room for everything as we move forward. The market will adjust and the more efficient producers will go ahead.
It is far easier to transport a load of biodiesel by tanker than to take any quantity of biogas to a facility, and we are a large and diverse country. Biomass pellets might be another story. It comes down to transportation costs. That is why I have always been a proponent of smaller, regionally based plants of any description because then we cut out a lot of the transportation to move the product in and out.
I agree with you. A number of different pilot projects are being undertaken, and we, as a government, are acting as a catalyst on a number of those projects that we are funding and having a look at. Exciting things are being done with livestock leftovers, whether it is a feedlot, dairy or processing facility. They are now capturing the wastes and raw materials, and creating their own energy to run the plant and cutting costs from that standpoint. There are tremendous opportunities, and it will be an exciting time.
Senator Mitchell: I was sitting here listening to you, and the tears began to well up in my eyes because I heard a Conservative cabinet minister say something I thought I would never hear one say, which is that doing something that is good for the environment can also be good for the economy. That concept is absolutely the key, and I encourage you to say that over and over again to the Minister of the Environment and to the Prime Minister. This idea that attacking the Kyoto Protocol and climate change because somehow it will bankrupt an economy is fundamentally wrong. Clean energy is the next industrial revolution. It may well be the salvation of economies like the agricultural economy, so I congratulate you in that, and I mean it absolutely from the bottom of my heart.
One of biggest criticisms is that ethanol production is burning food, and many people attribute rising food prices to ethanol production and the use of feed grains. My argument is that it is not immediately obvious, and likely, fuel prices and climate change are pushing up food prices. You will probably agree that, about the time that farmers are paid for their crop, somebody will say: We will take that away from farmers because now food is too expensive. However, nobody ever tells oil companies their fuel prices are pushing up the price of food, and maybe they should do something. Nobody ever tells fertilizer companies their fertilizer costs are pushing up the cost of food. However, we go after farmers. It is a good thing that farmers have a product to sell and farmers are diversifying. That is great.
Having said that, it seems to me that you have this approach-avoidance. About the time you have ethanol production working and ultimately, bringing improvements for the environment, you are stuck at an ethanol blend of E5, 5 per cent. Why do you not consider E10 or E15, the 10-per-cent or 15-per-cent mixes?
Mr. Ritz: We have a balanced, pragmatic approach. The blends of five per cent and two per cent were what the industry told us they could accomplish in that time frame. We say these blends are a minimum. A lot of provincial capacity builds on top of that minimum. I am already pulling up to pumps that sell a 10-per-cent blend.
The biggest argument we can make as producers and government officials is that when Canadians look at their disposable income, they still spend a small percentage of it on groceries. If people were honest, they probably spend more in a restaurant in a month than they do on the grocery bill.
We still spend far less in this country on the top quality sustainable food. No one has gone hungry — I should not make that bold a statement because certainly people in areas are going hungry — but our grocery stores do not run out of commodities and so forth. Again, that disposable income is there to buy that quality product.
An American study, and I have not had time to evaluate its validity, shows that the cost of gasoline and diesel fuel would be 20 per cent higher if not for the biofuel mandate. I cannot disagree with that statement at this point. There is a certain kind of validity there.
Senator Mitchell: You can make the argument that biofuel is cheaper so it reduces fuel costs, which tends to reduce food prices because there is a direct relationship between fuel costs and food prices.
Mr. Ritz: There is also competition.
Senator Mitchell: If this initiative is as worthy as you think it is, and I believe it has great promise — technologies for producing ethanol are in the second generation — why are you repealing the excise tax exemption? The oil sands have had all kinds of tax advantages and continue to do so, and this product is helpful for farmers, not to mention the environment, yet you are repealing the excise tax exemption.
Mr. Ritz: It is part of the greater package. I will defer to Environment Canada to give you the argument on that side.
M. McEwen: At the same time that the excise tax exemption was removed, other incentive packages to encourage the production of renewable fuels have gone forward.
Mr. Ritz: It is a tradeoff.
Senator Mitchell: You are saying second generation technologies will take 10 years to 15 years to develop. My feeling is that this development will happen faster than people believe. There is the problem of ethanol producers having to buy expensive grain as feedstock, so they are driven to find cheaper ways to produce ethanol, too. I believe strongly that when we become serious about climate change, just as has been the case in so many other international- level environmental initiatives undertaken by the world, it is accomplished much faster and less expensively than people imagine. However, we need to start and we need to drive, and I encourage you to push to that second level of technology to ensure there are environmental benefits and that we do not hurt food.
Mr. Ritz: I could not agree with you more. The ten years to fifteen years takes us into commercially viable production where we can produce the billions of litres we will need. Iogen is looking at a facility that has a capacity of some 300 million litres. It will take two years to build. I hope they will have the shovels in the ground sooner rather than later, and away we go.
Senator Mitchell: You have a huge job, though, because whenever there is a tradeoff between oil companies and farmers, the farmer always seems to lose.
Mr. Ritz: The unfortunate part is that producers across this country are price takers. We need fulsome access to the marketplace and not to be afraid; profit is not a dirty word for a farmer. There are huge input costs and tremendous expenses in equipment, land base and so on. We see situations where we have less land producing far more than we ever produced before due to the industriousness and innovation of our agricultural sector. That situation will only improve.
Senator Trenholme Counsell: I felt we were being put under the gun, and I wondered, because of the importance of this bill, why it came through so late. In other words, why will we be the ones accused of holding up the bill for industrial developments in this country? That is one question.
I must react to your statement, Mr. Minister, that nobody has ever gone hungry.
Mr. Ritz: I quickly re-qualified that.
Senator Trenholme Counsell: Yes, I know. It reminded me of 1987 when I was first elected as a member of the Legislative Assembly of New Brunswick. One of the first things I wanted to do in Sackville, New Brunswick, was to open a food bank because I knew, as a physician, how necessary it was, and many people said more or less the same thing.
I wanted to bring that comment to you. I heard a number of programs on the CBC, I believe, and different things about the moral issue of food in the world, and the issue of hunger and shortage of food supplies. I watched the scenes from Haiti, for instance, where people desperate for grains or food were eating one half or one third of what they were eating a few months ago or last year. I wanted to hear you speak about the moral and ethical issues about that situation for the planet.
Mr. Ritz: The winning answer to that question probably has a Nobel Peace Prize in it. We have studied the situation for years, and nothing seems to change. I have had the opportunity to work with colleagues around the world as we grapple with this problem. As the UN has said, there is not a shortage of foodstuffs. The problem is where the foodstuffs are and how to deliver them to the people most in need, and, in some cases, it is governance structures or infrastructure. For example, with respect to Burma a short time ago, the supplies were piling up as close as they could deliver them to the need, and the government of the day would not allow anyone in. We are still having problems with that situation.
Canada is the third-largest benefactor of food supplies in the world. That is $230 million, plus another $100 million as we begin to grapple with the whole idea that we need to teach people how to raise food for themselves. We have also disconnected the food aid so it does not need to be produced in Canada to be delivered to Africa. If we can buy locally we will, because of the high cost of transportation.
At the meeting of the Food and Agriculture Organization of the United Nations, FAO, in Rome, Canada was given tremendous coverage because we were the first country to disconnect food aid from supplying it from home. The only amendment is that they cannot buy it from someone like the U.S. who overproduced because of subsidies. This has been a tremendous opportunity to move forward.
A lot of non-government organizations such as the Canadian Foodgrains Bank that we fund as a government are doing, have done and will continue to do great work around the world. A number of initiatives are ongoing and it is never enough.
I am not sure anyone has the overall answer. One particular country cannot be the answer for everything. We have seen the situation where the UN — who represents the vast majority of countries in the world — is grappling with how to make it better for people in the world. I see the same films and problems out there that you do.
You all know the old adage: Feed a man a fish and feed him for a day; teach him to fish and feed him for a lifetime. That is the attitude the Canadian International Development Agency, CIDA, is taking. We are developing dams and irrigation systems instead of delivering a load of wheat. We are still providing the wheat but we are also helping them to learn.
I had the opportunity to be in Cuba in April as they grappled with a new regime and they came to grips with the fact they have last 50 per cent of their agrarian capacity because it has gone to weeds. How do they bring it back? They are looking for mentorship and that is something Canadians have always been good at. We have had programs in Africa and we have looked at countries like Cuba that are trying to turn the page — those who have the desire — and we have helped them. I think we need to do more of that.
Senator Trenholme Counsell: In terms of the amount of grains and food we are sending to countries in distress: Are we sending as much or more this year compared to five years ago or even last year?
Mr. Ritz: Over the past six years, if I remember correctly — and I stand to be corrected — we have increased spending by $100 million a year.
Senator Trenholme Counsell: Is that on food grains?
Mr. Ritz: On food aid: Are you talking about the Canadian Foodgrains Bank?
Senator Trenholme Counsell: No, I am talking about food aid.
Mr. Ritz: Yes, $100 million over the last six years.
Senator Trenholme Counsell: What about this year, though?
Mr. Ritz: This year, it will increase again.
Senator Brown: Mr. Ritz, it is nice to see someone fighting for farmers; it almost makes me want to go back to farming but not quite.
Something that you may have overlooked in your presentation is that a lot of this grain can be used for biodiesel or bioethanol. However, when it is frozen, it is not good for personal human consumption. Canola, when it is frozen, drops from expensive canola at $15 or more a bushel all the way down to $1 a bushel because it is bitter when it is frozen green. Therefore, it is not taken out of the food chain at all if it is processed into biodiesel fuel.
I also want to know if this soft white wheat, if frozen, can still be used for biofuels, as well, or does it make it impossible to use for that purpose? Most of it is not used for bread. Most of it is designed for cattle feed.
Mr. Ritz: They would need to look at a case-by-case scenario. They would need to test it. Anything for ethanol must be high starch to push the sugar content up. Right now, the best grain stock we have is called Canadian Prairie Spring, CPS, wheat. We grew that under contract to the Canadian Wheat Board and Cargill. I think Cargill was the offering agent in the early 1970s in developing it. We were seed growers so we would receive enough to seed 100 or more acres in the next year as we built the seed stock.
That is still our best variety. We have been withheld from new varieties because of kernel visual distinguishability, KVD, which is now out of the way. As long as it is high starch, regardless of whether it is frozen, blighted or piebald; as long as the starch content is up, they can make ethanol.
Frozen canola still works. It produces darker coloured oil. The last time I looked, my tractor does not care what colour the oil is. As long as the lubricity is there and as long as it burns properly, it will work. Significant tests have been done. There is a variety of barley I have been hearing about from which they can make a biodiesel. That is exciting.
Senator Brown: Along that line, my understanding is that the lubricity of biodiesel can double the life of an engine when it is beyond a 20-per-cent blend. I know someone close to my family who was involved in copyrighting the valve for switching from regular diesel to biodiesel. He was also experimenting with the University of Calgary and, I believe, the Rocky View School Division, providing their service trucks with biodiesel. They seem to be having good results.
Regarding cellulosic ethanol, my understanding is that Brazil uses everything. They not only use the part that they produce ethanol with, they use the waste to fire the boilers that drive the plant.
Mr. Ritz: As I understand it, the most successful ethanol production is fully integrated. For example, a company is not using natural gas to heat the boilers.
The particular enterprise I talked about in my riding — the 25 million litres — came up with a system based on a Germany burning system. They have the farmers open their sieves a bit and they are concave on the combines. In that way, they end up with more chaff; they bring in 10 per cent or 15 per cent chaff content in the wheat. Hauling chaff alone is like hauling ping-pong balls. They cannot load enough on a truck to make it pay. However, putting 10 per cent or 15 per cent chaff in with the wheat does not cost them anything and takes no room in the truck. They use chaff to fire the boilers as they clean it off. There is a lot of innovation out there.
With biodiesel, the two things that we have in our favour over the Americans with their soy-based biodiesel are, we have better lubricity and better cold-weather starting. The soy-based biodiesel is good to around minus five degrees. However, from the studies I have seen, canola can go to minus 25 before it starts to gum up. That difference is significant and is more the European standard.
We are talking about a slight variation on that if specified risk material, SRM, can be regurgitated to a biofuel stock. There might be some of that blend in there, as well. The vast majority will be canola based.
Senator Brown: I have one more comment. I think it is a cautionary comment for the industry. I am pleased with a minimum of five per cent to 10 per cent for ethanol and 2 per cent for diesel. I do not think this fuel system has proven to be the answer to our problems of consuming too many fossil fuels as a whole.
I think it is a good step. I think it will probably work into something that will use products that are not now usable, it will benefit us and it will be economical as well. I would hate to see us commit huge percentages to biofuels. I think Americans went a little overboard and they are running into problems now. I think this small step is better than a giant step.
Mr. Ritz: No one wants to take a step and then, have to move back. The Americans are facing that situation this year with 10 per cent of corn land under water. That land will not be seeded at all. It is significant to their overall package. We will need to wait to see how it works out.
We have worked closely with the renewable fuels industry and with the oil patch itself; we worked on what is doable and workable. The 5 per cent and 2 per cent was by far the best that anyone could discuss.
Senator McCoy: Thank you. I am wearing another hat. I am vice chair of Climate Change Central and we are conducting tests on biodiesel right now, supported largely by Natural Resources Canada.
I will direct my comments to Ms. Orsborne: Our convention is, we do not talk; we ask questions. Are you familiar with that?
Ms. Orsborne: Yes, we are familiar with it.
Senator McCoy: Please describe that to the committee. It is of interest because your briefing notes suggest it is a necessary first step before moving to the development of a biodiesel market.
Ms. Orsborne: I will do my best but I might have to provide some details later. The biodiesel demonstration was predicated on funding from Natural Resources Canada and Agriculture and Agri-Food Canada.
Senator McCoy: I beg your pardon, Mr. Minister, I was not aware of your participation.
Ms. Orsborne: Agriculture and Agri-Food Canada provided funding as well. There were two steps, one of which was testing biodiesel properties of different feed stocks for the biodiesel such as canola, soy and palm oil. The more interesting part of the demonstration was a collaborative effort between Climate Change Central, who heads the demonstration, the Alberta government, trucking associations in the region and fuel providers. One concern with regard to on-road use of this fuel was people's familiarity with the product and market acceptance. They demonstrated how this fuel would work on the road. The project is ongoing so there should be test results from the on-road demonstration of the integrated fuel system in 2008.
Senator Sibbeston: I am not familiar with biofuels and I am uncomfortable talking about it because in the Arctic, we do not grow potatoes or other such crops. I notice that much of the focus is on biofuels developed from grains; corn- based ethanol and soy-based biodiesels. One additional possible source of biofuels is wood waste. You mentioned that the government does not exclude the potential. Can you tell us more about wood waste? In Yellowknife and northern Alberta, they create wood pellets. Many people buy the product and I understand much of it is shipped overseas. One developer we saw a couple of weeks ago said that they switched over to wood pellets and now save $6,000 per week. There is a great reduction in costs and in greenhouse gases.
For Northerners, wood pellets might be the answer to home heating fuel concerns. Of course, there are no trees in the Arctic but in the subarctic region there are large forests of smaller trees that could be used to produce this kind of fuel.
Mr. Ritz: Tremendous innovation will come over the next little while. One study we have not talked about is on a biodiesel from green algae that takes over warmer waters in certain seasons. It holds tremendous potential as a renewable resource.
The quantity of pine beetle wood in British Columbia and Alberta has everyone asking how to make use of such a tremendous resource. Much of it is made into pellets but there is also a cellulose component that could be refined for an ethanol base. Yellowknife is totally powered by diesel generators, as you know. Anything we can do to offset that diesel fuel because of the cost of bringing it in and the environmental concerns that it raises needs to be addressed. A tremendous amount of time and talent will be invested in these new ideas.
We should not limit our thinking to the potential to keep moving forward with different ways of heating our homes and fuelling our cars. I understand Honda will introduce their hydrogen car in California this summer. They have gone to that step already. The thought process was that they had to go in that direction because they do not have the base for ethanol and biodiesel. Good for them.
We are not in this fight alone; global projects are moving ahead. I had the chance to meet with the agriculture and forestry minister from Finland and we talked about what they are doing with wood waste from the lumber mills. There is a tremendous amount of opportunity out there. It might not be the size of the wood but the kind of wood and how it can be broken down. As we go further north, the growth rings become closer together and the wood becomes denser, which might be problematic for breaking it down.
Senator Sibbeston: The Energy Committee was up North in Yellowknife, Inuvik, Tuktoyaktuk and Whitehorse. After that trip, many members are convinced that global warming exists. The North is being affected in a real way by global warming. It is no longer a question because people can see the evidence. There are no farms in the High North Arctic but I encourage you to visit and see for yourself. That will help you in your job, I have no doubt. You will be able to talk convincingly of the need to do all the things you are trying to do.
Mr. Ritz: I had the great opportunity to be up there a year ago, although not in the High Arctic. I was in Yellowknife and Inuvik. It is beautiful country and great people.
The Chair: If global warming keeps up, Senator Sibbeston, it may well be farm land.
Minister, I address this question to you. You might want assistance from Ms. Orsborne. The conventional wisdom we receive and operate under is that there are efficiencies with respect to greenhouse gas emissions in the introduction and use of ethanol in gasoline and diesel. However, two science publications have included studies that argue that because of the demands, the use of biodiesel and the cost of producing it increase greenhouse gas emissions. Is there an explanation as to the disparity between those views? Are you familiar with the science reports?
Mr. Ritz: I have seen a number of studies, senator. I defer to my colleagues in Environment Canada and in Natural Resources Canada because they have seen more than I have. I look at it from the producer's perspective. For each one that says this, another one says that. It is hard to come up with a cohesive, concise plan. I can only point to the studies conducted by the government — Climate Central, Environment Canada, et cetera. However, many scientific studies are not based on our model but on other global studies. They might provide a bit of direction or a parameter to work with but they do not speak to the situation that we face in Canada.
Certainly, I would defer to them.
Ms. Orsborne: Yes, we are aware of the science article and we have conducted analysis on it, which we would be happy to provide to the committee.
The Chair: Please forward it to the clerk of the committee; we would be grateful.
Ms. Orsborne: On an overall perspective, when we see differences in analysis, usually it is the parameters around which people are assessing energy and GHG benefits. Natural Resources Canada uses the GHG model and methodology for assessing biofuels. The vast majority of studies say that ethanol and biodiesel both have a positive energy and greenhouse gas benefit on a life-cycle basis.
The parameters that change include considerations around how the agricultural feed stocks work, whether they use till or no-till fertilizer, whether we replace 5 per cent or 100 per cent of our fossil fuel use. Those parameter differences have a big impact.
The analysis of Natural Resources Canada uses the GHGenius model, which is widely accepted — over 1,800 people use it. That includes academics, government and environmental organizations. It has shown there is, on a life-cycle basis, a 40-per-cent greenhouse gas reduction for ethanol when they replace gasoline, and a 50-per-cent fossil energy benefit. For biodiesel, those numbers are higher; it is an 80-per-cent energy benefit for biodiesel and a 60-per-cent greenhouse gas reduction. Looking forward to next generation, depending on the feed stock and the technology type they have, there is potential for up to 90-per-cent greenhouse gas reduction.
The Chair: If you would send our clerk those differences in the parameters and methodologies you talked about, it would be helpful to us. You are the first witnesses on this bill and there will be others, so it would be useful for members to know.
Mr. Ritz: One other point that is not often made when we look at the cost-benefit analysis is the tremendous amount of carbon taken out of the air and atmosphere with the new growth that any farming cycle begins. That benefit is a tremendous one as well; carbon goes into the ground and is held there — carbon sequestration.
The Chair: Considering the efficiencies we look at, it is easy to say, if we use 5 per cent in our gasoline, there will be a savings of 5 per cent of the gasoline we use, but that is not true. Would you please talk about the insertion loss, if I could put it that way — the net energy benefit — because there is an input that goes into making ethanol as well?
Can you tell us what the model is that you use to determine what the net energy benefit is? Some of us understand that the actual number is about 1.25. In other words, if we make five units of energy out of ethanol, it takes four fossil fuel units to make those five units. Is that fair, correct or wrong?
Ms. Orsborne: That is what you will see when I send the analysis. Instead of going into figures, I prefer to send you that analysis so you have the right analysis we used for the renewable fuel strategy. It is a model, so I will send you that information so you have the right facts and figures in front of you.
The Chair: Are the numbers I gave you not right?
Senator Mitchell: I thought you said what the greenhouse reductions would be.
Ms. Orsborne: On a life cycle basis, but I think the honourable speaker is talking about different factors. He is talking about efficiency gains in different parts of the life cycle. What I spoke to is when they produce the crop to when they put it into a car in the form of ethanol or biodiesel; that is 50 per cent or 40 per cent, the numbers I cited. The conversion factors are details we would have modeled for the renewable fuels strategy and the efficiency factor. We can provide those things to you in that summary document.
The Chair: When you provide that information, can you tell us in terms of that net energy balance that everyone else is talking about?
Mr. Ritz: There are also big discussions around the upstream and downstream costs of production.
The Chair: And where do you circumscribe it?
Mr. Ritz: Exactly: A tremendous amount of fossil fuel is used in the discovery, development and bringing-on-line of fossil fuels. Somehow, they are left out of the equation at times. They say the farmer used this in the tractor to seed and this in the combine to harvest, but they do not take into account the drilling and discovery on the fossil fuel side. If we compare apples to apples, there is more to the equation.
The Chair: The United Nations has come up with a suggestion recently that there should be a moratorium on the development and further use of ethanol in particular, and other biofuels in general, until it is determined that there is less or no competition between food and fuel for things that we grow. Has the government taken that suggestion into account? You addressed the question earlier, but I am talking specifically about the UN request for a moratorium.
Mr. Ritz: I do not think we are prepared to back away from the 5 per cent and 2 pr cent at this point. We have a balanced, pragmatic approach. That is part of the reason we did not go overboard to begin with. We have to walk before we run. We have to ensure that everything works. I know the American model on biodiesel was aggressive and they have had to back away and change a lot of what their thought process was.
I do not have a problem with the United Nations direction in that regard. I think other countries around the world may want to reassess what they are doing. I certainly would compare the design and the degree we are moving forward on this very favourably to anyone else. We have not been over the top and over-demanding of industry to accomplish this goal — 5 per cent is very attainable.
As I said, the weather is a bigger factor on the food side than it ever is on the situation of 5 per cent. I do not see us backing off on it at all.
Senator Spivak: I am happy to hear you talk about what is happening in fuel from waste, et cetera. In the meantime, we are using food for fuel.
I understand what you are saying about the Canadian situation, and it is probably balanced. However, the United Nations food and agricultural organization said last year there was a 4.6-per-cent increase in the production of grains worldwide, but then there was a 5-per-cent increase in demand. It was almost balanced.
At the same time, a record 100 million tonnes of cereal were used as biofuels. If those grains had not been used to produce fuel, we would have had an increase in grain stocks of approximately 12 per cent. Worldwide, it is not only oil; it is the fact that grain stocks are not what they once were. They are decreasing.
Mr. Ritz: As an inventory on hand? We used to have a three-months' supply ahead and so on.
Senator Spivak: I am not suggesting that Canada, with its modest balance, is in that situation. I am referring to the fact that using food for fuel is not without its dangers.
I want to ask another question. The U.S. Department of Energy calculates that every 10,000 litres of water produces 5 litres of ethanol, and maybe 1 or 2 litres of biodiesel. That is the U.S. Department of Energy. I do not know what the Canadian situation is.
I notice that recently you have helped the Saskatchewan farmers with the drought situation. Have you taken the use of water — we are talking about environmental progress — into account in terms of using feed stocks for ethanol and biodiesel?
Mr. Ritz: When you talk about food shortages around the world, there are a number of influences. The biggest shortage we are seeing, when it comes to the world's poor, is rice, which is not used as an ethanol base in any way, shape or form. Less rice is being grown around the world. In the new and emerging economies in China, India and so on, the burgeoning middle class is saying we want this item in our food supply, not necessarily rice.
When I was in Cuba and I met with the Minister of International Trade there, he was trying to buy rice from South Vietnam. They had a moratorium on selling rice because they wanted to make sure they had enough for their own people.
The minister asked what he shoud do because rice was up to $1,200 a tonne and could be higher by the time it is transported to Cuba. I said the problem is that they have to change their diet. When they cannot buy rice, they must start looking at other products that can fill bill.
I said we have a tremendous stock of potatoes in Atlantic Canada and in Alberta; we could ship them to Cuba for half that money and they would have the same kind of food content. However, the people there would have to eat potatoes instead of rice. There are ways and availabilities around the problem.
When you speak about water usage, a lot of it is recaptured and reused. I would not speak to the fact that it takes 10,000 litres to produce —
Senator Spivak: This is from the U.S. Department of Energy.
Ms. Orsborne: One of the differences between Canada and the U.S. when we look at things on a life-cycle basis — I have not seen that article but I assume, at that level, they are looking at a life-cycle basis — is they are talking about irrigation of their crops and the crops used to generate biofuels. Our agricultural production is different from the U.S.
Senator Spivak: Does Saskatchewan not use irrigation?
Mr. Ritz: They use a small amount.
Senator Spivak: What about Alberta?
Mr. Ritz: Again, it is sporadic.
Senator Spivak: Saskatchewan uses very little?
Mr. Ritz: Yes: I would not want to hazard a guess, but irrigation is a small percentage of the total acreage. In Alberta, irrigation is predominantly in the southern part of the province.
The Chair: The irrigation in Alberta is not for grain; it is mostly other crops.
Senator Spivak: I am not saying that you are not taking a modest step. I think you are.
However, the idea of food for fuel at this point has many people worrying about the moral consequences when the demand for food will not lessen, given China and India in the equation. It is a consideration, perhaps, that needs to be taken into account.
To what extent is the government thinking about the increasing demand for food while looking at the future, and the use of waste and cellulose for biofuels? That is what we would all want.
Mr. Ritz: I could not agree more. That is the next generation. There is no doubt about it.
We are also a throw-away society. As much as we recycle, the mountains of garbage keep appearing in every small community across Canada. For the major cities, it is one of their major problems. Coming up with ways and means of reusing that garbage and converting it into energy, which we are hungry for, is the right and responsible thing to do for governments.
The five per cent and two per cent are a modest step.
Senator Spivak: According to Senator Brown, you will not increase it.
Mr. Ritz: It is possible to increase it, but as we do, the reliance on fossil fuels goes down because we replace that use with biofuels.
We are already approaching $140 per barrel for oil. How much more must it go up before people become serious about carpooling and all the other things that they always talk about but never do?
I think there will be major changes globally. Canada is a responsible global citizen when it comes to foodstuffs and all the other issues we face as a country. Canada is a democratic country with a conscience and we have a proud record to point to. We will continue to be a leader.
The Chair: As you cited earlier, is one of the global food shortage problems not due to the fact that the United States and parts of Europe are dumping commodities at prices that drive local producers out of business?
Mr. Ritz: That is the genesis of the Doha round of negotiations of the World Trade Organization, WTO. We are making progress. There is no doubt that we are down to micro-steps. Whether it will come to a ministerial meeting this spring or early summer is anyone's best guess. The longer it takes, the less chance there is for that to happen.
We see major players changing on a day-by-day basis regarding what they are asking others to do. We need to wait and see how that turns out. However, the Doha round is the genesis of a lot of discussion about how we level the playing field and ensure that third world farmers have a chance.
The Chair: We must hope that they do.
Senator Milne: In February, when this bill was before the House of Commons committee — that is four months ago — the government was using an excise tax exemption for ethanol use as road fuel regardless of the source of the ethanol. In other words, Canadian producers could buy it from the U.S. or Brazil if they wanted.
I understand that exemption ended on April 1. When Mr. McEwen, appeared before that committee, he noted that there would be a producer incentive to replace the excise tax exemption. Earlier tonight, Mr. McEwen said that he still did not know where that issue is going.
Surely, after four months, something has happened in that regard and either the minister or you, Mr. McEwen, know where the government will go on this issue.
Mr. McEwen: I hope I did not say that the government did not know where it was going on that issue. My colleague from Natural Resources Canada can speak to the status.
Senator Milne: You were the one who spoke about it in February. Ms. Orsborne, perhaps you can answer where Mr. McEwen cannot.
Ms. Orsborne: Mr. McEwen is probably referring to the ecoENERGY for Biofuels program. It was announced by the Prime Minister last summer and is a $1.5 million program that started this April. We have 23 applicants that we are now examining.
Senator Milne: You have applicants. How long will it take before you examine those applicants and something happens?
Ms. Orsborne: We have 23 proposals and they are under program review right now. If they meet the criteria, then they will be part of the program.
Senator Milne: Will Canada no longer buy ethanol from the United States, Mr. Minister?
Mr. Ritz: There is a potential. NAFTA leaves the door wide open for willing buyers and willing sellers. We also have free trade agreements with other countries that produce ethanol. Once we sign onto those agreements, there is a certain amount of back and forth trade. Whether ethanol is stipulated or not in the agreements, it is a tradable commodity. Anything we bring in, of course, we are anxious to market out as well. That is the nature of a free trade agreement.
Senator Milne: If Canadian producers step up to the plate and start producing ethanol as the end result of this bill, will they also be able to trade it to Brazil?
Mr. Ritz: Yes, depending on how they blend it and what the end user does with it.
Senator Milne: If the ethanol coming in from other countries is cheaper than the ethanol produced here, this bill will not help them much, will it?
Mr. Ritz: There are ways around that. The quality of their ethanol must be the same as that produced in Canada. We have a certain standard that we work with. There are also different qualities of gasoline around the world. We would have to work that out on a case-by-case basis.
There is no doubt that there is a lot of room to grow. My biggest concern is that the longer it takes us as a government to pass this legislation, the more that hungry market will be filled by outside factors. Once we start the tap and a pipeline running in a particular way, it is difficult to shut it off, turn it around and push it back.
Senator Milne: It seems to me the pipeline is already running; the tap is turned.
Mr. Ritz: Not to any great extent; there are dribs and drabs of product available. Biodiesel has been used in underground mines for about 10 years or 15 years as a pilot project. That fuel was imported because we were not producing anything at all at that point.
We have the potential and capacity to gain in that situation. Our closest and largest trading partner is the U.S. They are so energy-hungry that even with their aggressive time frame and percentage targets, they are still short.
The Chair: Mr. Minister, you mentioned the timeline. I should have informed you earlier that this committee will sit on Wednesday, June 25 and Thursday, June 26 and will report to the Senate on June 26 with our recommendations with respect to the bill.
Senator Mitchell: Ms. Orsborne, we are making this decision quickly. Therefore, can you send those studies to us quickly?
Ms. Orsborne: Yes, I will do that.
Senator Mitchell: We need them by tomorrow.
The Chair: In that respect, senators, is it agreeable that when Ms. Orsborne sends us those numbers that they become a part of the record of the proceedings?
Senator Mitchell: I want to pursue that a little more now.
Senator Spivak: Can you also give us the U.S. Library of Congress figures for corn-based emissions for ethanol?
Ms. Orsborne: I do not know if we have the capacity to do that by tomorrow. I have not looked at the Library of Congress figures.
The Chair: We can ask our researchers and analysts for that information, senator.
Senator Spivak: I thought you may have a comparison.
Senator Mitchell: I want to clarify what you said earlier because you gave us some figures. I am not being overly optimistic when I heard you say that there is a significant pick-up or reduction in net carbon and there is a significant pick-up or reduction in net fossil fuels used. Is that correct?
Ms. Orsborne: Yes, there is a significant life-style benefit from a fossil energy perspective and a greenhouse gas emissions perspective when we replace one litre of gasoline with one litre of ethanol, and one litre of diesel with one litre of biodiesel.
Senator Mitchell: Is that equivalent in British thermal units, BTUs? Does one litre of ethanol provide the same amount of energy as one litre of gasoline?
Ms. Orsborne: There are efficiency differences.
Senator Mitchell: How significant are those differences?
Ms. Orsborne: That is within the overall analysis. I can provide that information.
Senator Mitchell: There are still net gains on carbon —
Ms. Orsborne: That is the basis for Environment Canada's regulatory factors of what their greenhouse gas benefit will be.
Senator Mitchell: Have you seen these studies and are you confident in them?
Ms. Orsborne: We manage the GHGenius model, and it is the only one of its kind in Canada. It is well regarded.
Senator Brown: Have you ever heard of the Hollywood star who said food is for people, not for profit. I think we found a long time ago that, in the world of $400,000 combines, farmers need to make a profit. I would give the same answer to the United Nations.
We are billed to export food, as we always have in this country. We export, I believe, 80 per cent of our food, and consume 20 per cent. The Americans, on the other hand, are exactly the opposite: They consume 80 per cent and they export the other 20 per cent. That is what has caused Canadian farmers a little bit of trouble over the years because Americans have always been able to produce it cheaper than Canadian farmers.
I wanted to stomp on the idea of food not being for profit because farmers must have profit.
Mr. Ritz: The biggest driver in the food price increase in the last short term has been speculation. Oil and the fossil fuels have been driven up as high as they can go. Therefore speculators are looking for something else. We see that on things like oranges, depending on the frost, et cetera. It is the speculation on food that drives prices up; it is not what the farmer is making.
The amount the farmer makes on a $3 loaf of bread is now up to 19 cents. We are not the bad guy here. Everyone receives their portion. Many hands touch and handle it; transportation costs are a huge factor for farmers. There is more to price than meets the eye.
Senator Brown: The biggest input for farmers is the cost of fossil fuels because it goes into everything they do.
Mr. Ritz: We are captive to hydro-carbons as farmers. It is the basis for fertilizer, chemicals, transportation, fuel for equipment, et cetera. We are big users and this is a great way for farmers to recapture the carbon in growing crops and the ethanol facilities.
The Chair: I have one last question, Mr. Minister: This committee has been highly, obstreperously critical of the previous government and of this one with respect to the sustainable development strategies of its respective departments. Our last report was tabled in the Senate last week. You may not have seen it yet but it is consistent with the views expressed over the last few years — successive governments — by the respective commissioners of environment and sustainability.
The European Union is considering implementing legislation that will allow only what they call "certified'' biofuels onto the market. Is that legislation a factor in the policy that your government will bring forward, and in the regulation that will be promulgated?
Mr. Ritz: Is that as opposed to black-market ethanol? What do you mean by "certified''?
The Chair: It is certified in the sense that the biofuels must deliver a benchmark level or a minimum level of GHG savings and that they meet other sustainability criteria.
Mr. Ritz: They have set a benchmark of GHG emissions gained in the production of the ethanol or biodiesel? We are looking for a gain. If there is no net gain, why would we do it? The whole idea is to have a hard cap and, by 2020, hit a certain target. A fair amount of our formula is based on the take-up. Three billion litres of ethanol is like taking one million cars off the road. If we do not gain that to some extent, we are looking at a lot of work for nothing.
There is a huge gain to be had here. It may be tough at times to qualify or quantify the actual numbers but, overall, we are headed in the right direction.
The Chair: The present bill, which was amended by the committee in the House of Commons, suggests that parliamentary committees should look at the efficacy of the bill on a regular basis. However, the bill does not require that review.
Are you comfortable with "maybe you guys should look at it,'' as opposed to "you shall look at this''?
Mr. Ritz: I am a believer in reviews. We move on to the next project and forget about the last one. There is so much work to be done. I have no problem reviewing and ensuring the impact is still positive. Let us reassure everyone there is not a loss to the food line at any given time. I have no problem reviewing.
The Chair: This committee does a lot of review, Mr. Minister, and we will with respect to this bill.
You may wish to be aware of the meetings we will hold in respect of this bill. The first one is Thursday morning at 8:30. There will be a succession of witnesses.
The next meetings will be Wednesday, June 25, at 9 a.m., 1 p.m. and 5 p.m. Also, there will be a meeting on Thursday, June 26, at 9 a.m., 1 p.m. and 5 p.m., if necessary. That will be the day on which we will arrive at a determination, consider the bill clause by clause and report to the Senate.
Mr. Ritz: Excellent.
The Chair: Senators and minister, you have been patient. Mr. McEwen and Ms. Orsborne, thank you for staying with us.
The committee adjourned.