Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 12 - Evidence - September 29, 2016
OTTAWA, Thursday, September 29, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:03 a.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I'm chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room and viewers across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees.''
I will now ask senators around the table to introduce themselves. I will introduce the deputy chair, Paul Massicotte from Quebec.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Patterson: Dennis Patterson, Nunavut.
Senator Fraser: Joan Fraser, Quebec.
Senator Seidman: Judith Seidman, Montreal, Quebec.
The Chair: I would also like to introduce our staff: our clerk, Lynn Gordon, and two Library of Parliament analysts Sam Banks and Marc LeBlanc.
Today marks the sixteenth meeting of our study of the effects of transitioning to a low-carbon economy as required to meet the Government of Canada's announced targets for greenhouse gas emission reductions. We are looking forward to hearing from two witnesses. From the Canadian Natural Gas Vehicle Alliance we welcome Bruce Winchester. Welcome, Bruce. You have a presentation to make. Because we have to break a little bit early to go in camera, we would like to keep your presentation to 10 or 12 minutes, if you would, and then we'll go to questions and answers.
Bruce Winchester, Executive Director, Canadian Natural Gas Vehicle Alliance: Thank you, Mr. Chair. Honourable senators, I would like to thank you for the opportunity to come before your committee and outline Canada's natural gas transportation opportunity.
Let me give you a bit of background by way of introduction. Canadian Natural Gas Vehicle Alliance, the organization I represent, is the national association representing Canada's natural gas vehicle industry. Our membership includes natural gas distributors, manufacturers of vehicles, vehicle equipment, fuelling equipment, research and development innovators, engineering service providers and operators. Our mandate is promote the adoption of natural gas vehicles in Canada. We also support safety through the development of codes and standards, training, research and innovation within our member companies, universities and in partnership with the Government of Canada through industry outreach activities in support of natural gas vehicle adoption.
The transportation sector employs almost 1 million Canadians and is a $70-billion-a-year industry in Canada. It's the second largest source of greenhouse gas emissions and other air pollutants. In such a vast country, finding cost- effective low-emissions transportation is an enduring challenge but is one where natural gas can play a critical role.
Canada's transportation network is vast and interconnected with the United States in over-the-road applications as well as through key sea ports. Natural gas is used as a fuel for marine, rail, on-road trucking and even some off-road applications such as mining.
As an alternative to conventional fuels, natural gas can deliver significant emission savings, and in particular it can reduce greenhouse gases by 10 to 30 per cent, depending on the application.
As a Canadian natural resource, natural gas reserves are vast and the prices are at an all-time low. Developing a broader market for this plentiful Canadian vehicle fuel can make a significant contribution to lowering a variety of harmful emissions and has the potential to give Canada significant cost advantages in our transportation sector. As we well know, for an export-oriented economy like Canada, low-cost transportation is critical to our growth and prosperity.
The CNGVA and Canada's natural gas vehicle industry have strong partnerships with the Government of Canada and have outreach activities with Natural Resources Canada and Transport Canada. The Natural Gas Use in the Canadian Transportation Sector Deployment Road Map; Liquefied Natural Gas: A Marine Fuel for Canada's West Coast; and the forthcoming Liquefied Natural Gas: A Marine Fuel for Canada's Great Lakes and East Coast were developed in collaboration with the Government of Canada.
More recently, provincial governments in Quebec, British Columbia and Ontario have begun supporting deployment of natural gas vehicles. In British Columbia and Quebec, this support is included for on-road vehicles as well as marine vehicles. The STQ in Quebec and BC Ferries are using or are about to use natural gas in some of their operations. We have also seen some off-road mining vehicle applications in northern British Columbia and soon in Quebec.
To date, the Government of Ontario has signalled its support for on-road vehicle adoption. In Budget 2017, the federal government announced the most significant measures of support of adoption in recent years: Natural gas fuelling was included as part of a $62.5-million program to support the development of alternative fuelling infrastructure.
As I said, this is the most significant financial support from the federal government in recent years, but relative to the challenges facing the industry, more can be done. To begin, over the last two years, the retail costs of natural gas relative to diesel and other fuels have approached parity; it's about the same price now. This has negated the payback for those who invest up front in natural gas vehicle equipment. Attaining economies of scale and a refuelling distribution segment of the market requires both more vehicles using natural gas as well as enough refuelling infrastructure to support a robust network. This is why federal funding is welcome — particularly when it's added to provincial funding opportunities — and is necessary to get the industry past a key tipping point.
Rest assured that the industry's focus is not on the passenger vehicle market. It is focusing on a limited number of medium- and heavy-duty truck fleets, a limited number of domestic marine fleets, and possibly heavy rail routes and some remote and off-road applications.
But even with this narrow focus, significant infrastructure needs to be developed to ensure retail prices for natural gas are able to match long-term outlooks for low natural gas commodity prices. It is important to recognize that the industry players, like natural gas distributors that are basically utilities, cannot easily invest in the development of this infrastructure, particularly as provincial regulators place limits on how these investments can occur.
Fleet owners do not operate in a high-return environment. Freight rates are very competitive and are usually a function on a high-margin basis: The more you ship, the more money you make. As an industry sector, they often lack substantial capital investment and rely on long service of vehicles, for instance, 40 or more years for marine and rail vehicles, and the timing and opportunity for fuel switching can be a very narrow window.
Upfront capital investment is the industry's challenge. Meeting ambitious short- and long-term climate change objectives is the government's challenge. CNGVA in its pre-budget submission encouraged the Government of Canada to consider a $1 billion strategic investment in the natural gas transportation sector.
That's an investment over five years and it would have the following components: assistance for on- and off-road vehicles to offset the incremental vehicle costs associated with new natural gas engines, conversions and on-board fueling systems — in other words, fuel tanks; assistance with incremental costs associated with adding natural gas to Cardlock facilities or with internal company-owned refueling systems; funding marine vessel refurbishments and incremental costs for additional natural gas to new vessel purchase costs; funding for marine and rail fueling facilities directed at port corporations and rail support facilities; and funding for locomotive refurbishment and incremental costs for additions of natural gas to new locomotive purchase costs.
CNGVA has requested the federal government to support research and development and deployment. In particular, Canada's unique transportation challenges contribute to the development of leading high-horsepower engine applications, but Canada's small market has not been large enough to get the next generation of these engines out and deployed. We believe the federal and provincial governments can play a role in encouraging that.
Finally, natural gas distributors have taken a leadership role in proposing targets of 5 and 10 per cent renewable natural gas content in the blend, which they will be distributing to all customers. This will significantly improve the environmental performance of many natural gas applications, and this adds to the excellent environmental performance of all of these applications with regard to greenhouse gas reductions.
The capture and combustion of renewable natural gas derived from organic waste at landfills, agricultural and food waste sources can actually result in a negative carbon footprint for Canada. CNGVA has asked the Government of Canada to assist in identifying and deploying new technologies RNG production, and support for RNG innovations can help put Canada into the forefront of the global clean tech economy. The CNGVA is enthusiastically supporting your committee's work. Natural gas vehicles are a tremendous opportunity for Canada and they are worthy of your ongoing support. Thank you.
The Chair: Thank you very much, Mr. Winchester. We will begin with questions.
Senator Massicotte: Thank you for your presentation. I'm trying to understand the spectrum of choices in a summary fashion. Can you help me out? In one spectrum, we have the current gas-powered vehicles, basically, and then you have the natural gas, hydrogen fuel cells and maybe electric vehicles. You are saying your niche for natural gas is medium to heavy trucks. I presume the very light ones would be electric. Would you foresee the future being electric, predominantly?
Mr. Winchester: First, our technology is actually deployed and on the roads. If you live in Ottawa some of the time, as most of you do, you probably have a natural gas vehicle picking up the garbage at your home. Waste Management's fleet in Ottawa runs entirely on natural gas.
Senator Massicotte: Give me the pros and cons of each. I have four in my mind. Natural gas, in an environmental sense, is approximately one third less polluting than gasoline. Am I correct in saying that?
Mr. Winchester: That's correct.
Senator Massicotte: For electric vehicles, it depends where you get your electricity, but their pollution is nil, maybe. Hydrogen fuel cells is also nil, and its advantage compared to electric, I gather, is that you have no distance limitation with natural gas, or hydrogen fuel cells. Can you help me out with the rest?
Mr. Winchester: The point I was making was that, unlike hydrogen, these are actually commercially available vehicles. There are no electric vehicles in these market segments, and there are not likely to be any. When it comes to light duty vehicles, I would never discourage anyone from looking at a light-duty natural gas vehicle, but when you talk about it from an environmental point of view — you mentioned the impact. If the Province of Alberta converted all its entire light-duty vehicle fleet right now to electric vehicles, they would increase emissions by five megatons.
Senator Massicotte: And that's because of where they get their electricity. That's not the case in Ontario, B.C. or Quebec.
Mr. Winchester: That's right. So I would never walk into B.C. or Quebec and say, "You know, natural gas vehicles are a good idea.'' That is one the challenges for policy development in Canada.
Senator Massicotte: You said 10 years out. There was an article in the newspaper recently in Montreal in which they referred to natural gas as a medium-term solution. It is still two-thirds pollutant compared to gas. Hydrogen would solve that issue. You are saying operating costs for hydrogen and natural gas are equivalent to gasoline, but you will probably have an additional 20 per cent purchase cost. And then there are infrastructure issues, and it's the same thing with hydrogen fuel cells.
Mr. Winchester: I would advise caution regarding hydrogen for a couple of reasons. The first question you have to ask yourself is: Where are you getting the hydrogen from? If you are stripping it off from natural gas, what are you doing with the other stuff that is not hydrogen? It is considerably more expensive as a fuel because of the process to get at the hydrogen. I don't like to bash any of the gaseous fuels. There is a lot of work we can do with hydrogen. We have talked about blending hydrogen with natural gas as another way to increase its GHG performance.
The challenge with hydrogen and I was at Natural Resources when the decision was made to remove their hydrogen refueling appliance. They removed it and junked it; they just threw it out. I worry about those kinds of lurches in technology and I worry about overreach. I like hydrogen and hydrogen fuel cells, but I think we should wait and see what is actually in the marketplace before we come to the conclusion that natural gas is a shorter-term solution than it might be.
The other thing that I think extends the legs of our ability to meet those decarbonizing objectives is this really exciting opportunity around renewable and natural gas. What you do with renewable natural gas is you take landfill, which is already a methane release, and use that in the vehicles. In the cities of Surrey and Hamilton, they are currently parts of their fleets using renewable natural gas, so in effect, they have closed that waste or carbon cycle.
If you look at the four sources of renewable gas, which aren't counted as emissions right now, we could probably displace all of the vehicle gas, particularly for medium- and heavy-duty applications, which make up 1 million to 3 million vehicles in Canada, versus 22 million passenger vehicles. It's those medium- and heavy-duty vehicles that actually produce half of the transportation-related greenhouse gases.
I think that we certainly can be deployed now. I think there are some small cost challenges that we need to get over. If we were to get past those tipping points we would have a lot more comfort and capability with gaseous fuel. I think that would allow us to build a platform where things like hydrogen could come along and may be deployed sooner than would be the case if we continue down the road of diesel fuel and heavy fuel oil, in particular, in these medium- and heavy-duty trucking and transport sectors. In a way, we are a bridge, but I think we are also a very long-term solution.
Senator Seidman: Thank you very much, Mr. Winchester.
Two days ago, we heard from Louis Thériault of the Conference Board of Canada and we talked about gas, specifically in relation to medium- and heavy-duty diesel trucks and conversions. While he was of the mind that there were some benefits, he said that there really was not much of a payback to industry, number one, environmentally from their calculations, and there was quite a resistance to making that kind of transition.
So I guess you're the perfect person to ask about this. What is your impression about those factors, regarding payback to industry, and resistance because of a host of reasons like reliability? They may sense that it is not very reliable. Does it really have an impact on the environment?
Mr. Winchester: I guess it would have been more effective if you had the diesel and gasoline producers come and present that report, because they funded it. I'm not trying to knock the Conference Board; they do great work. I looked at that report and I know that if you look at vehicle conversions, which are a 50 per cent — or less — proposition, you don't get the big emissions reductions. But it misses the boat completely when you look at a company like Canada Steamship Lines. Their Trillium-class vessels are running fairly modern engines in the marine world. Replacing that with a natural gas engine would give you a 30 per cent reduction in greenhouse gasses, right there — bang — one spot.
If you look at what's occurred in terms of the commercially available vehicles, yes there are conversion kits and, yes, the industry is great. The conversion industry is an important bridge for when original equipment manufacturers finally decide to offer these engines in a more robust way.
Cummins, which has about one third to 40 per cent of the engine market in North America, makes three natural gas engines. They are on their third iteration of the technology, which is to say that every time they make an improvement, the greenhouse gas and the pollution performance of those engines improve and continue to be better than the equivalent diesel engine that Cummins produces. Now, Cummins doesn't like to advertise that because it kind of cuts into their diesel sales, but the reality is that those Cummins Westport products — Westport being a Canadian company from British Columbia and an innovator that has allowed Cummins to make those engines work — they are producing on a life-cycle basis 17 per cent reductions, and their next generation engine may move that up to closer to a 20 per cent reduction, again on a life-cycle basis.
Don't forget that it's not just the tailpipe emissions; there are also emissions associated with the distribution and extracting of those gases, or oils as the case may be. So there are also other gains there.
The natural gas industry in Canada — another thing about some of these studies you may see is that, in the United States, natural gas is a much leakier proposition than it is in Canada. When you look at the life-cycle impact in Canada, the performance is much better. Why? Because Canada's natural gas distribution industry has gone through a very responsible program of reinvestment and replacement of pipes and fittings with newer ones and with ones that are plastic and other materials that have much better integrity than, say, cast iron, which is more often the case in the United States.
We have a lot of advantages in using this, and we already have a really good distribution system that's right there and that can be used and easily deployed for many purposes.
Senator Seidman: Are you saying there are benefits that have been calculated?
Mr. Winchester: Absolutely, and with a tool, by the way, that was created in partnership with Natural Resources Canada, Environment Canada, provincial governments and industry, and also the liquid fuels industry, so it's not like they were out of this — and the biofuels industry. It is called GHGenius model. It is the Canadian equivalent of something that's called GREET in the United States.
I would direct you to the GHGenius model because that's the one that's applicable to Canada and there are some key differences between those models. If you spoke to Don O'Connor who worked on the model and manages it in Canada, he would be able to go into much more detail about those differences, if they matter to you.
Senator Seidman: What is your sense of this resistance, then? Because we definitely had the impression yesterday that there is a resistance to the industry making a transition.
Mr. Winchester: It is very difficult to compete with Cardlock facilities numbering about 1,000 and three or four different retailers that give you, if nothing else, the illusion of competition if you are a long-haul trucking company. They are used to diesel, and they are still grappling with the after-treatment systems that have been put on in the last few years. There have been some famous failures on the part of engine manufacturers in North America to deliver on performance.
They are very worried about this. Why? Because their job requires moving product down the road every day. As military people would say, they have a "100 per cent no-fail mission.'' They are worried to take on a new technology and the risks associated with it. They're also worried about buying — as they did in some cases — trucks that have new emissions systems that failed.
Ours are very well proven. We are working with the Ontario Trucking Alliance in Ontario. We work quite readily with the trucking community in Canada, but you have to recognize that when you ask them to spend extra on a vehicle and get the payback over time, they are skeptical. It is as if someone knocked on your door — not in Quebec, but in Ontario, say — and said, "Switch to natural gas. It's cheaper, and it will pay you back over a number of years.'' Lots of people don't take advantage of that because it involves an upfront cost, and that's one of the challenges.
I think the final challenge is that we psychologically go with what we like and what we know. If you look at electric vehicle penetration rates, which ought to be astounding, particularly in Quebec, given the amount of electricity and how much cheaper it is, people are still resistant to buying electric vehicles. Other than the fact that a Tesla is really expensive, there is no good reason not to do more of that.
Senator Fraser: I was intrigued by your reference to the capture and combustion of renewal natural gas from organic waste of landfills, cultural sites and so on. Could you expand on that? What is the potential there? Is it expensive to get into the business of capturing that gas? Are there other difficulties of which I am not aware enough to put the question?
Finally, how does that make it possible to result in a negative carbon footprint? It's still gas that we are using, right?
Mr. Winchester: Sure. Remind me again of your home province.
Senator Fraser: Quebec.
Mr. Winchester: EBI in Quebec does this. They're a waste company east of Montreal. They operate a landfill facility and convert their landfill gas to biomethane, which is renewable natural gas. Canada is actually well along in this field. Europe is little ahead of us, but we are ahead of the Americans. They produce this great gas that is, I assume, a pretty good price. We have estimated that, on a commodity basis, it would increase the price of natural gas by a multiple of three, but the thing to keep in mind is —
Senator Fraser: Triple the cost?
Mr. Winchester: The commodity cost. It's an important distinction. For the purposes of blending at a rate of 5 to 10 per cent, it is a small, incremental cost for the utility. If you wanted to use 100 per cent in your vehicle, and I would not necessarily suggest that as an early-on strategy, it would be pretty expensive.
However, because the commodity price is 15 cents a litre equivalent, the big part of the price is the cost of compression, which is the natural gas equivalent of refining. So you wouldn't quite notice it as much if you were using it in your tank.
But here is what EBI is doing, which is interesting and distressing from a Canadian pride perspective: That gas is injected into the system in Canada, and EBI gets a credit from California; they get money paid to them from California. The gas never goes to California, the emissions are counted for California and you're probably using that gas somewhere in the GazMétro system.
I won't say that's absurd, because there are a lot of provinces pursuing that kind of approach. It is a way that industry can develop.
The challenge around waste conversion is this: You have municipal governments who have waste water facilities. A lot of money is being invested by the federal government in waste water facilities and in partnership with municipalities. Until the gas distribution industry signalled that they were going to buy this renewable gas, the idea of converting it didn't make sense because it is considerably more expensive than fracked gas or other conventional gas.
That move on the part of the natural gas distribution industry is one signal, and it is a voluntary move. Quebec is looking at making it a mandate. I won't get too far ahead, but I believe British Columbia and Ontario are thinking about those kinds of mandates. We have put forward a proposal that this be included in the next biofuels mandate as a way to help the liquid fuels industry comply with those.
So those signals will help, but municipal governments will need a fund or something to access that will allow them to make those capital investments. As you all know — and I'm sure you're all municipal taxpayers, too, as property owners — that's the worst group and way to approach revenue-raising. It's better to do it on the basis of income or spending. That's the challenge. If you look at the money municipal governments have, out of the three orders of government, they have only 10 or 20 per cent of the funds the other two orders of government have.
So there is definitely a role for the federal and provincial governments to play there.
Senator Fraser: How much would a municipality the size of Montreal have to spend to get into the business, and how would that give us a negative footprint?
Mr. Winchester: Oh, I'm sorry. It depends on the size of the project. It would cost multiple millions of dollars: A waste water project would cost $20 to $30 million. With a mandate, we'd be able to sell it to GazMétro and pay back a debenture bond over 10 or 20 years, but they would need access to a debenture bond.
In terms of the negative, well, you could take a vehicle and knock 20 per cent off its greenhouse gas emissions to begin with by going from diesel to natural gas. And then if you blend that RNG up to the point where you get to zero — or negative — and did 100, you could theoretically have a 20 per cent reduction in greenhouse gases.
How does that occur? This is part of the magic of counting emissions. You're taking an emission that is out there in the world, be it chickens in a coop or waste water, and you're now using it for something else that would otherwise have produced an emission. It's a trade, not unlike that between EBI and Californians.
Senator Massicotte: I have a quick supplementary question, because I want to make sure we understand the answer to the question, which was very good. That part would be very interesting to us, if you can remove a pollutant that already exists. You're saying that, litre for litre, it's currently three times more expensive than natural gas, unless you use words like "mandate.'' But unless you change the rules and force these people to use that gas, they're never going to get there, because you have a 300 per cent increase in costs. So you're saying the solution should be imposed or subsidized by one of the levels of government. That's how I read your answer.
Mr. Winchester: That's a fair characterization.
Let me put some nuance in there, because there are many steps in between. One of the challenges is that if you look at the price of natural gas right now, it is so low that most people producing natural gas are probably not making very much money on it.
As a result, you're trying to compete with the lowest cost source of energy and with a source of energy in North America that has a 200-or-more-year reserve. So when I say the commodity portion of the cost, which, if you looked at a litre of natural gas in your vehicle, is in the range of 10 cents, and that would move the commodity cost up to 30 cents, if it's three times the cost. If they were to use renewable natural gas in a jurisdiction like Nova Scotia, where the commodity cost for natural gas is much higher than anywhere else in the country, it would actually be a little bit cheaper than conventional gas on a commodity price basis.
One of the challenges in Nova Scotia is that when you layer on the compression costs, it's actually more expensive than diesel fuel. The compression cost is basically what it costs to put the fuel in the tank, so the one challenge is that, right now, it's fairly expensive because these are new technologies and one-off designs.
As the technology improves, I suspect the cost will go down over time. With mandates, which the natural gas utilities have asked for and are going to impose on themselves in a voluntary fashion, you at least have the predictability around making that kind of investment.
What I'm saying is that municipalities don't often have access to the money, the technology and the know-how, and there is a role for federal and provincial governments to play in helping them get there. We spend a lot of money, as a country, on supporting university-level research, but we're not doing so well at getting world-leading and world- beating technologies patented and out there. This is one area where we have an opportunity to win, and we should pursue it.
Senator MacDonald: Mr. Winchester, I'm sure we both share one common goal or interest. I've always been a huge believer in natural gas. I think the evidence in support of the use of natural gas has been there for a long time. But it seems like there's an awful lag in the conversion to natural gas with regard to the use of diesel in heavy trucks, locomotives, marine work and particularly for the production of power in the North of Canada.
How do we compare in our conversion use to the rest of the world? Which countries are on the front end of this in terms of the conversion of technology?
Mr. Winchester: Canada is at the front end of it from the development and technology point of view. To pick up on the point I made about RNG, Westport, and a company called IMW, which is now Clean Energy Compression, have long led the world in selling Canadian goods to places like China and India.
There has been a lot of use of natural gas in places like China, and there has been interest in it in certain South American countries. It remains fairly robust in Italy, and the Americans made a big move into natural gas in the last 10 years.
Our adoption rates aren't very good, and I've spent a lot of time thinking about and trying to understand what's different about Canada and how the conversation is different here.
Let me put a couple of those things out there and say to you it's not that there is anything wrong with the technology. It's not that it is excessively challenging. In fact, it's market-available, and if there was more demand there would be more market availability of the products, and there would be more natural gas vehicles in the market. In some jurisdictions, there are a lot more natural gas vehicles on the roads.
What's different about Canada? Well, we possess the third- or fourth-largest conventional proven oil reserve in the world. We do not import oil on a net basis from places like the Middle East, and with those connotations that it has in the United States. Unlike places like India, we have both a well-developed natural gas and liquid fuels distribution system and network, so that opportunity for a new, or different, technology to leapfrog and to make market penetration as we've seen in some other jurisdictions just isn't there.
This is sort of perverse, but the other thing about places like India or Latin America is that we actually have more stringent pollution requirements. So moving to natural gas in those jurisdictions can have a much more measured and visible impact on nitrous oxide, or NOx, reductions. We already have low-NOx diesel, and things like that, in North America.
In the United States, which is our closest peer, I will go back to that argument around being a net oil exporter. The comment you get about people converting their fleets in the United States is that, "We're tired of sending money to people who kill and hurt my friends. We want an American resource source. We don't want to import oil from anybody.'' And they mean Canada when they say that, unfortunately, and I think that has made for a different conversation and a different ethic amongst trucking firms in the United States. They not only see the payback opportunity and see it as an environmental mitigation strategy, but there is a nationalistic component to it in America that's different from here.
I wouldn't want to have to have that, but it would sure make adoption easier in this country.
Senator MacDonald: What would we require in terms of the regulatory framework that's not in place now that would drive this technology?
Mr. Winchester: We're doing pretty well in terms of on-road regulations.
I think that moving forward with the emissions standards in a clear and concise way for the off-road applications might actually help encourage some of the engine manufacturers who make large mine haul and construction vehicles to look at natural gas as part of their offering. Right now, those vehicles don't have a lot in the way of pollution mitigation. They are where trucks were 10 or 15 years ago. It would be beneficial to move forward with those regulations, which Canada has signalled it will do in lockstep with America, because it's a North American engine market.
I think making sure we push the Americans on that and making sure natural gas is in the mix is in Canada's best interest.
The other area is that of marine and locomotives. I won't spend a lot of time beating up on locomotives. My understanding is that it is the North American nature of the industry and the fact that Canada is in the top tier of Class 1 railways. They're North American. Is CN headquartered in Chicago? I don't know, but it seems like it is.
What I'm trying to say, in a round-about way, is the decisions are being made in the United States. I think that industry will decide how they want to approach that from safety, education and emissions management points of view on a North American basis.
I'm going to wait and see what comes out and decide what comments I will add to it then.
When it comes to marine, this is something that is squarely at your federal level. A lot of those transport regs you talk about — a lot of the regulatory conversations I have are with provincial governments. They regulate things like truck rates that have an impact on natural gas. It's not a big problem because the rates in Canada are way higher than the American rates, and most of our key markets are trucks going into America.
The other one is odd things like CRNs. Again, that's "Canadian registration numbers'' for pressure vessels. That's provincial. Finally are decisions around operation engineers when you operate high-compression-type applications. Those are again provincial.
But at the federal level, you are the regulator in the marine industry. There are a few acts and bits of regulation that could be updated and modernized. Our two studies we did on the West Coast and East Coast, and a Great Lakes study that I hope will come out in a few weeks — get to the things around navigable waterways acts, maritime training, fuel- bunkering and port-side operations — those are all federally regulated things, and those are all elements that could use updating and upgrading to be a little more natural gas-friendly.
BC Ferries and STQ are functioning under an exemption system that Transport Canada has, but it has been torturous for them. At one point they were told they could park the tanker truck on the ferry to bunker. Then they were told they couldn't do it and had to do it from the dock. There's been a lot of back and forth.
It's okay to go through that the first couple of times you try something, but we cannot have that on an ongoing basis. We have to have more clarity. If you are going to be able to bunker marine vessels in the same way as they do with liquid fuels, you will probably need to have a barge in the water beside it. We need clarity around what size barge or smaller vessel can be used to move fuel into a larger vessel, and what safety and regulatory systems do you need in place. If you think about the Port of Montreal, it's very narrow. You get into proximity issues with the trans-shipment of dangerous goods and regulations.
All of that needs to be looked at with a lens to be friendlier to natural gas. When I say that, I don't mean compromising the safety culture; I mean looking at it and using a good risk-based paradigm and using correct and accurate understanding of the properties of natural gas, which are distinct from liquid fuels.
The Chair: I will have to encourage answers to be a little shorter because it takes away time from each senator and we only have so much time.
Senator Ringuette: I have one question, which follows a certain logic. I take myself, for example; I have to drive between Ottawa and New Brunswick, so I have a gasoline car. I could have a diesel car also because the sights between both locations will provide the source of energy.
Some areas I've seen — a few McDonald's along the way — have the capability to refuel electric vehicles but I have not seen anywhere as of yet between Ottawa and New Brunswick any retail place that I could refuel if I had a natural gas car.
It's a little bit like the chicken and egg: When people started to buy natural gas furnaces and stoves, the industry provided the network of supply. You cannot expect people to buy natural gas vehicles if there is not a network supply.
What is your refueling site plan?
Mr. Winchester: One of the reasons we're not spending a lot of time looking at passenger vehicles is that you need a lot more places to refuel passenger vehicles because there are 23 million of them. It's pretty taxing. That's a much better challenge to put to the folks in the electric industry, and I think they have good answers on that.
When you look at Cardlock facilities specifically geared at heavy-duty trucks and look at how fuelling occurs with those medium- and heavy-duty vehicles, 30 per cent of those vehicles are fuelled on site, which is to say by the people who own the vehicles, and the rest are fuelled at Cardlock locations. You are probably driving by natural gas vehicle Cardlock locations when you do that trip. There are GazMétro — and EBI has stations — but they're not the stations you will stop at with a passenger vehicle because they're at truck stops and Cardlock locations.
Senator Ringuette: So you're stuck at the chicken and the egg.
Mr. Winchester: Only a little bit.
Senator Ringuette: You have a natural gas vehicle alliance that promotes natural gas vehicles, but in order to have natural gas vehicles, for the bulk of vehicles on the road, there is no refueling capability.
Mr. Winchester: I would agree with you. Again, that's why we aren't pursuing that segment. With regulated monopoly utilities like GazMétro, Enbridge, FortisBC, et cetera, the regulator won't let them put the cost of bill that natural gas refueling infrastructure for passenger vehicles on the rate base. That's a decision that regulators make. As a result, you're left with private companies.
Senator Ringuette: Provincial regulators?
Mr. Winchester: That's provincial regulators. But let's not beat up on them here.
So there are some companies — there is one in the U.S. called GAIN, and I could arrange for you to pop by their station in Montreal. The problem is that it's probably off the beaten track when you are travelling. But they do exist. There is one in Mississauga, as well.
Senator Ringuette: It's not reassuring.
Senator Patterson: I have one supplementary question to Senator Seidman's questions about the Conference Board report. They said that while natural gas emits fewer greenhouse gas emissions than conventional petroleum fuels per unit of energy, as you said in your presentation, Mr. Winchester, when you count the upstream emissions from production of fuel processing and delivery, the net greenhouse gas emissions increase with the use of LNG.
Would you have a comment on that?
Mr. Winchester: That's not what the GHGenius model shows. I wouldn't describe that as accurate. I would say the following, though: When you talk about the difference between compressed natural gas and liquefied natural gas, LNG, for the most part we're not talking about LNG with the medium- and heavy-duty trucking fleets.
There are some that run on LNG. There are some challenges with LNG projects depending on how they are developed and scoped. But the LNG currently being used is sourced from GazMétro and GazMétro uses a lot of non- emitting electricity in that process. That's one of the advantages.
If you look at the Petronas project, which is a large-scale LNG project, it has a fairly significant emissions profile. The way they can change that emissions profile — and I haven't looked at the first iteration versus the second iteration, so I will not attribute anything to either — is to use more electricity, particularly in B.C. where there is theoretically a fair bit of non-emitting electricity in order to do those super-cooling processes.
LNG is gas that's brought down to a temperature of 162 degrees below zero. There is energy required to do that, and if your energy source for that is coal, then your emissions profile will go up. That is challenging, and in the United States where there is liquefaction that is powered that way, those numbers can be higher.
I looked at the Conference Board study and, as I said before in a cheeky way, it was trying to make a particular point and it is at variance with our experience as an industry. If you brought folks from GazMétro, from FortisBC, they would tell you a different story about their particular emissions profile.
Senator Patterson: I'd like to ask this: We're looking at the transition to a low carbon economy, as required to meet the Government of Canada's announced targets for GHG reductions. I guess we want to know where natural gas fits in the low carbon economy. What recommendations would you suggest the committee make to the federal government on this subject?
Mr. Winchester: Because you're the senator from Nunavut, I will mention the North in this as well and I'll go a little beyond my mandate.
We work with the Canadian Gas Association, and they are advancing suggestions with the distribution industry about ways we can serve remote and rural communities, places like Nunavut. They like to talk about Inuvik, which actually receives LNG for part of its power needs. I think we should look at more of those applications. It then allows communities like Iqaluit to look at natural gas for their cars and vehicles. It would be simpler in Iqaluit. As you know, there are only a few roads, so you could operate a fairly tight distribution system for natural gas. That would be very beneficial for people in the North but also very expensive and capital-intensive.
We think the Government of Canada should look at those opportunities. Obviously, when there is a mine site or some other thing nearby, it makes it a little bit more cost-effective. As you know, whether it's broadband or anything else, there are certain places in Canada where the government has to step up and be involved. The Department of Aboriginal and Northern Affairs is already paying for those fuel costs. When fuel prices fluctuate, that poor deputy minister goes to Treasury Board one or two times a year and says, "May I go to the management reserve and have more money, because we've misjudged the cost of fuel for our Northern communities?'' You will not have those same problems if you start offering choice with natural gas. That's one thing.
On the vehicle side, we've made recommendations around helping out with the deployment. In particular, the federal government should play a much more robust role in promoting clean techs like renewable natural gas.
Those are the kinds of recommendations I think you should consider.
The Chair: Thank you. That's the end of the questions. I have a couple, and then we will break and go to our next witness.
I agree with you in what natural gas is doing with fuelling heavy equipment. For instance, Robert Trucking has a trucking fleet that they're going to change over to natural gas or LNG, and it's a large investment, which is great. That's also happening on the West Coast. I'm familiar with Westport Engineering and what they're doing. In fact, most of their technology is sold out of Canada around the world to other countries. It's having a hard time getting Canada to think about natural gas. The heavy equipment is the target, I'm sure, to start with, and not small vehicles.
We have to reduce, through commitments by the government, 291 million tonnes of greenhouse gases by 2030. If in fact you were to change over the heavy-duty fleet — that's in mining, maybe rail, those kinds of things — do you know what the cost would be? We're trying to get the cost down to what it costs the average Canadian for all of these things.
To be perfectly frank, I don't think the average Canadian understands how difficult this will be and the changes that will have to be made by average Canadians to actually reach these targets. The targets after that are tougher yet. This is the easy part, 291 megatonnes.
Do you have any information on that that you could maybe help us with a bit so we can have some idea what this is going to cost the average Canadian? I don't care who gives the money; whether it's government or industry, that all filters down. It comes down to the local taxpayer paying the bill.
Mr. Winchester: I do actually have some of those numbers that we've done some work on. Many of them are still at the internal discussion level amongst our members, but I would be happy to provide you with some of those and some of the ways in which we've gone about looking at and calculating it. It is not an insignificant challenge. The commitment today by the current government in terms of reduction targets is the same as the commitment of the previous government. It crosses partisan lines. When you look at vehicles, if you wanted to replace all the vehicles tomorrow, it would be very expensive. Twenty million vehicles are purchased a year in Canada. Is it 10 or 15 years? I don't know, but it's probably that kind of time horizon.
The Chair: 2030 is the target date.
Mr. Winchester: I know. What I'm saying in a roundabout way is you're probably not making your target date unless some very radical things happen in the Canadian economy, none of which we'd want to see happen. The way that Russia met its first Kyoto targets was to have a complete collapse of its economy, not a recommended course of action.
So the recommended action would be to accept the targets, know that they are going to be hard to meet and start moving on them immediately.
Ways we can do that is to send the right signal to business. A lot of the governments are doing that. I must be honest; both the previous government and the current government have been very supportive of natural gas. I think they get it. The reality is you're only going to knock a few megatonnes off by converting to natural gas.
The Chair: Or electricity.
Mr. Winchester: Or electricity, for that matter, yes. You will have a harder time with the passenger vehicles than with the heavier vehicles. Why are the heavier vehicles easier? There are a thousand Cardlock stations versus tens of thousands of gas stations. We know you're going to be talking about fewer people.
The other thing is that in the freight industry the cost gets passed on.
The Chair: Actually, all the costs get passed on.
Mr. Winchester: That's right.
The Chair: It's not just the freight industry. Every cost gets passed on.
Mr. Winchester: Truth be told; but it's particularly obvious in freight because the cost of whatever you get is always a function of freight. That's where governments need to be careful and need to make sure that if they are going to put a carbon tax in place, when they recirculate that money they put it in places where actual mitigation and reductions will occur. That's going to be hard to do.
In terms of the cost per tonne, it depends how you calculate it, but suffice to say $40 a tonne is way less than what it will actually cost to reduce those megatonnes of GHGs. Probably we should be thinking — and this is not specific to natural gas; this is broader — hundreds of dollars, and then the harder ones are thousands of dollars per tonne. It's going to be costly to our economy and there will be trade-offs between changing our behaviour, investing more money in the vehicles and in the equipment we use, and will probably also involve collapsing of some elements of our economy. Some economic sectors won't survive as a result.
Senator Massicotte: You said hundreds of dollars. Are you talking about the price of carbon, the price we would have to meet to achieve the result?
Mr. Winchester: In some cases, yes, if you add up what it costs. If you say, "I will eliminate this particular source of greenhouse gases,'' depending on how you calculate it — and there is a bit of accounting mastery there — it may not be $40 but hundreds or even thousands of dollars for some of those reductions.
Senator Massicotte: You can talk about financial incentives, but if the market worked perfectly, you're saying that is the inherent cost of getting there if you use the market forces?
Mr. Winchester: In some cases, yes.
The Chair: If you would share that information with our clerk so that the rest of us can get it, I would appreciate it very much.
Thank you very much, Mr. Winchester, for your presentation. We appreciate it very much.
We will go on with our second witness, Steven McCauley, from Pollution Probe. We look forward to hearing your presentation, and then senators will have some questions. The floor is yours.
Steven McCauley, Acting Chief Executive Officer, Pollution Probe: Thank you, Mr. Chair. Pollution Probe is pleased to appear today, and I sincerely wish to thank the committee for its invitation for us to appear and make our submission and for its interest in this very important area for our organization.
Pollution Probe is a national not-for-profit environmental group and is very active in the area of the transportation sector's efforts to decarbonize and reduce its impact on human health and the environment.
Earlier this year, Pollution Probe launched The Pathways Initiative. It is a response to the significant greenhouse gas, or GHG, emissions reduction challenge faced by the transportation sector, which the committee alluded to in its comments and discussion with the earlier witness.
Transportation, as you know, is a leading source of GHG emissions in Canada, and in many provinces across the country, it is the number one emitter, by a significant margin, over other sectors.
Low-carbon mobility options are becoming increasingly viable in Canada and the rest of the world.
A link to the pathways report is included in the submission that we made to the committee. In summary, the technology pathways that we have found to date with substantial potential to reduce GHG emissions from transportation include continued aggressive improvements in conventional light and heavy-duty vehicles. The industry has made a lot of progress in that area and I think there is more that can be done in the areas of powertrain efficiency, hybridization, light-weighting of vehicles and enhancing aerodynamics.
I heard references in the earlier discussion to electric vehicles and, obviously, there are important opportunities there as well as in the continued development and use of low-carbon, first-generation advanced biofuels. Renewable natural gas, natural gas and emissions reductions in the rail sector are other pathway opportunities.
Within these low-carbon pathways, there are a number of options which offer great potential for reducing the environmental impacts of transportation in Canada. I would like to provide a brief overview of these options and explore, in more detail, two areas that have substantial opportunities for GHG reductions: electric vehicles and renewable natural gas.
For light, or passenger, vehicles, one area that Pollution Probe feels is very important is that the Government of Canada continues to enhance the stringency of its federal GHG emission standards, in concert with the United States. The government is now reviewing those standards with the U.S. Environmental Protection Agency and there are opportunities there to make those standards more stringent and drive greater GHG reductions. I'll come back to electric vehicles later.
A priority area for GHG reductions from the transport of freight is the deployment of natural gas and renewable natural gas, not only for on-road, but also for the marine sector. Again, that's another area I will explore in a few minutes.
Right now, the federal government is reviewing opportunities to move ahead with new heavy-duty vehicle standards for post-2020 model years. There are opportunities to make those more stringent, but also address the challenge of existing heavy duty fleets. More work could be done with the trucking industry, similar to what EPA has done in its SmartWay program, in which they work with industry to move ahead with more fuel-efficient technologies and also operating practices.
The off-road vehicle sector is an area which is largely unregulated and includes vehicles used in agriculture, forestry, mining and construction, and accounts for 5 per cent of transportation emissions in this country, and it's growing. There could be a number of opportunities there, not only with the use of natural gas and renewable natural gas, but other technologies such as hybrids and electrification.
I would like now to turn to electric vehicles and the significant opportunity this technology pathway presents for reducing GHGs.
Last week, Pollution Probe, in collaboration with Bruce Power, the University of Waterloo and Plug'n Drive, released a study which examined the barriers and opportunities facing electric vehicle technology.
I understand this report has been circulated for the committee's attention.
The report concludes that electric vehicle technology, or EV, is a substantial opportunity. Although there were approximately 18,000 plug-in vehicles on the road at the end of last year, and this is a small percentage of our on-road vehicle fleet, there have been significant increases in year-over-year sales since EVs entered the market in 2010. For example, in 2015, EV sales increased by 32 per cent from the previous year.
Despite the broad-reaching opportunities presented by EVs, there are still a number of barriers that must be addressed if we are to realize fully the potential of this technology. Briefly, one barrier is that when Canadians go to showrooms to purchase EVs, there is limited availability and long wait and production times. There are many misconceptions among the public about this technology. There is a need for greater information to help consumers determine if an EV would be a good fit for them, and they need better information about how the technology works, and the makes and models of EVs that are available.
The report to which I just referred highlights a number of options for government action that could help accelerate the adoption of this technology. I mentioned earlier in my remarks the federal regulatory agenda for passenger vehicles, and those regulations do contain some incentives for electric vehicles and other alternative vehicle technology. There is an opportunity to greatly enhance those and to incent automakers to put more electric vehicles into the marketplace. Natural Resources Canada also has a fuel consumption labelling program, which Canadians rely on for information on fuel-efficient vehicles. There are also opportunities to enhance and improve the amount of information available so that Canadians are informed about the benefits, both environmental and from a cost perspective, of electric vehicles.
There was discussion earlier that referred to infrastructure challenges and Canadians' ability to charge their electric vehicles. There is obviously a need to address this barrier, alleviate concerns about range anxiety and have stronger and more effective EV charging infrastructure across the country.
There is also a need for more effective public awareness and education programs to reinforce and expand the information currently available to Canadians about electric vehicles.
And industry needs to work with its dealerships where there is a lack of understanding about the product and provide greater training to dealerships to increase their knowledge and capacity to sell these vehicles into the marketplace.
Another area that's important is with respect to utilities and electricity local distribution companies. There have been some concerns about the ability of electricity infrastructure to accommodate increased charging of EVs in local neighbourhoods, for example, although that's not a concern in the short term.
As we see increased deployment of electric vehicles in the future, Canadians will need to be reassured that their neighbourhood grids are effective and can respond to the increased charging requirements in their neighbourhoods. That will obviously help accelerate the adoption of EVs nationally.
I'd now like to turn to the subject of renewable natural gas and present some initial policy options for moving forward on this important low carbon transportation fuel. I understand you've had a briefing on much of this already so I'll keep my remarks brief.
The view from Pollution Probe is that RNG cannot only significantly reduce GHG emissions but also air pollutants. Obviously there are still local air quality issues across the country and there are benefits from renewable natural gas and natural gas that could be realized.
While natural gas is well-suited for all transportation applications, Pollution Probe believes that the biggest GHG reduction benefits are in the freight and medium heavy-duty transportation sectors, which represents more than 1 million on-road vehicles. This is a sector that is increasing rapidly, and high horsepower applications such as long-haul trucks are the biggest and fastest growing emitters in the country.
Natural gas vehicles offer GHG emission reductions of 15 per cent to 25 per cent relative to diesel, and these savings grow with the increased blending of renewable natural gas. Depending on the source and production technique, GHG reduction benefits can range in the order of 50 per cent to 125 per cent. And this is data from work that Pollution Probe has done with the Canadian Gas Association.
Significant advances on RNG use in transportation have been made in the United States and Europe, and there is an opportunity for Canada to take advantage of the progress. Policy options that could help level the playing field and lower barriers to increase natural gas engines and RNG use include opportunities for Canadian government support through cost sharing with industry of increased infrastructure.
I heard reference to the infrastructure challenge we're facing and clearly that's going to have to be something that government can work with industry to accelerate.
The Ontario government, in its climate change action plan, announced a significant investment in infrastructure for heavy-duty refuelling in natural gas and I think that's an important step. Also, the Government of Canada announced its funding in Budget 2016, which is an initial investment in this area as well and that's very positive. But clearly more needs to be done to build on this initiative and on this initial investment.
The U.S. Environmental Protection Agency has recognized renewable natural gas as a compliance option in its national standards in the U.S. to incent RNG in heavy-duty fleets and there is an opportunity for the Government of Canada to harmonize with those efforts and amend our own Canadian renewal fuel regulations so that we're fully aligned with the EPA renewable fuel standard.
There are also opportunities to collaborate with U.S. and federal governments on RNG development. A number of jurisdictions like California have launched a technology road map to look at all of the opportunities and also barriers that RNG is facing, not only from a financial perspective but also looking at the technology and working with the industry. There are a whole range of things that can be done but I think a longer-term approach is necessary and a road map in that area would be very helpful.
In summary, natural gas and renewable natural gas, as well as electric vehicle technology for light-duty fleets offer enormous opportunities for Canada to reduce GHG emissions from transportation while also promoting economic growth for the country.
I didn't really talk a lot about what those opportunities are, but clearly there's a technological opportunity through advancing these sectors where we already are leaders in a number of areas and I think we can really accelerate those economic opportunities.
Pollution Probe will be continuing to work with our partners to advance these opportunities to decarbonize the sector and support the transition to a low-carbon economy.
In conclusion, I'd like to again thank the committee very much for inviting us to appear today and I look forward to your questions.
The Chair: Thank you, Mr. McCauley, for that presentation.
Senator Massicotte: You talk about electric vehicles and so on. Does that include the hydrogen fuel cells, which is a process creating electric vehicles. How does that fit into the future?
Mr. McCauley: From my perspective and from Pollution Probe's perspective, both are substantial opportunities. In the near term, clearly, you're seeing electric vehicles on the road in increasing numbers for light duty passenger vehicles. There is no question that that's accelerating and we're starting to see the potential realized of those emissions.
Hydrogen fuel cells are an even greater opportunity in the longer term. There are still challenges around infrastructure to fuel those vehicles, but if you listen to what companies such as Toyota have been saying and the significant investments they've been making in that technology, I think in the medium and long term those vehicles are going to be a huge emissions reduction opportunity that can complement what we're seeing with electric vehicles.
From the perspective of Pollution Probe, it's important for government to set regulations that are not technology specific but set a level of stringency that really incent automakers to innovate and then let the marketplace decide what is the most appropriate opportunity.
Senator Massicotte: I agree 100 per cent with that last statement because who knows what the future will tell us about batteries and so on. But what is the short term? You said there are some short-term challenges with the hydrogen fuel cells. Are they the same challenges as natural gas with infrastructure or is there something else?
Mr. McCauley: I think the most significant challenge is on the infrastructure side. Ford introduced some fuel cell technology in vehicles at least six, seven years ago, if not longer. In B.C., when the B.C. government moved with California on a hydrogen highway there were fuel cell vehicles on the road there. So there have been successes in that area. There have also been fuel cells introduced in buses for transit. The technology is viable; the question is about the infrastructure and the source of the hydrogen to fuel those vehicles.
The advantage that we have with electric vehicles right now is that you're seeing governments across the country making significant investments in infrastructure to charge EVs and it's really a near term. It's a present opportunity that you're seeing that we can take advantage of and that's the advantage in the short term for EVs.
Senator Seidman: I would like you to elaborate a bit on this electrification of transportation that's really very key. I know in Quebec and in Montreal there has been a deliberate attempt to prioritize this and develop a program of electrification, specifically to begin with on the fleet of municipal small cars. Of course, that is a great starting point.
The whole issue of infrastructure, which you have mentioned and I believe your EMAP study at the City of Toronto focused on this, is a huge problem, along with a lot of other things. For example, I drive to Ottawa from Montreal and an electric car wouldn't serve me very well because of the distance of travel; yet, from my usage in Montreal it would serve we very well. There is that duality which a lot of people would face. If I did have an electric car, where would I charge it? I live in a condo building and there is no charging facility right now, though they are considering it.
While you present a lot of hope for the program, and I myself have a lot of hope for it, how do you deal with those infrastructure issues and what did your study of Toronto show you?
Mr. McCauley: There are a lot of very good points in your question. The issue of condos is an example of one of the barriers that we wanted to highlight in the study. We made it clear as a conclusion that there are substantial opportunities and also benefits that we're seeing in the short term, but if we are really going to capitalize on the longer term opportunities, there are actions across the board we need to take. For condos, for example, there is no question that there are opportunities to improve building codes and the infrastructure so that people in condos and apartments have opportunities to charge. There are no requirements in most jurisdictions across the country to enable people living in those buildings to charge, and it's a real barrier, so one of the opportunities that we found is that you could look at other jurisdictions such as Colorado and California where they put requirements on new builds in that area to have charging infrastructure implemented.
There are some things that maybe aren't going to be high profile initiatives that are big announcements that could be made but that I think could be very important at a technical level to overcome a significant barrier.
You talked more broadly about infrastructure. If you look at what Quebec, Ontario and British Columbia have done with substantial investments in charging infrastructure, the point you made is absolutely true. EVs don't work for everyone. A lot of charging infrastructure announced is going into urban areas where it makes the most sense for commuters. A number of jurisdictions are also engaged in programs looking at corridors, for example, between Toronto and Montreal along the 401, so that when an EV owner who might primarily use their vehicle for commuting within an urban area decides to go through the 401 or another highway there are charging stations. So it opens up that option.
Clearly, the near-term opportunity, until the battery technology improves to increase range, is going to be in the urban area and not as much in the rural area.
You mentioned EMAP. That was a technical study we did with utilities and municipalities to make sure that neighbourhood infrastructure and grids could accommodate increased charging as people buy more EVs in neighbourhoods, so that the investments were made in infrastructure to accommodate that charging demand. The outcome was largely a good news story. We worked with utilities and targeted the areas where we saw increased EV adoption happening so that utilities would make the investments to upgrade grids to ensure that a transformer wasn't going to overload, for example. It's not a concern in the short term but that's an area we referred to in the report to say make sure this will continue to be addressed over the longer term.
Senator Fraser: I would like to come back to the question of renewable natural gas, and you talked about the desirability of having Canada align its regulations with the EPA. Could you talk more about that? What would be involved and what would be the cost? To what extent is this initiative within the federal universe and to what extent would it have to be provincial?
Mr. McCauley: Those regulations are completely in the jurisdiction of the federal government under the Canadian Environmental Protection Act, and they mandate a certain level of requirement for renewable fuel for heavy duty fleets. So what EPA has done and which we are encouraging we harmonize with is that within those regulations certain fuels are recognized and given incentives. They are technical regulations but they basically give credits or provide benefits to the industry that blends those renewable fuels into their fuel supply. It is a built-in incentive in the regulations to encourage adoption of RNG.
Senator Fraser: Is it a cash incentive?
Mr. McCauley: No, it makes it easier for them to comply. It is enhanced compliance. It provides greater flexibility for the fuel producers to meet those regulatory requirements.
As far as cost, there is no question there is going to be a cost increase, and I think, again, by providing greater compliance flexibility for the industry, there is an incentive to help absorb those increased costs for RNG.
But it's interesting. In talking to the Ontario Trucking Association recently, I heard in their comments about natural gas and renewable natural gas that they see that as a significant opportunity for their members, once the infrastructure challenge is addressed, because they see a significant cost advantage for their members over diesel in that there is greater fuel efficiency with natural gas and renewable natural gas. So the cost impacts are not as great overall from our perspective as what you would encounter in other technologies or renewable fuels because of the fuel efficiency benefit for the industry.
Senator Fraser: Thank you.
Senator MacDonald: Are there permanent restrictions on the ability to recharge an electric vehicle quickly? People like to jump in the car, fill it up and go. In an urban environment you can plug it in overnight and have it charged for the day. But we live in an environment where people drive through drive-throughs constantly to get a cup of a coffee and don't get out of the car. The speed of refuelling the vehicle is a constant variable when it comes to using vehicles.
Are we ever going to get to the time where technology will allow us to refuel the vehicle with electrical power instantaneously, or is it because we are using electricity power that it will be a long, more arduous task to refuel or recharge a vehicle?
Mr. McCauley: When I look at how fast the charging technology has come even in the last five years, the charging infrastructure that is now being put in place in most areas with government support is the so-called level 3 charging, which enables full recharge in 20 to 30 minutes, where previously with level 2 you were looking at hours. The advancements in the technology are almost breathtaking in how fast it is happening. So I would expect to see, as the technology evolves, charging time decrease significantly.
Senator MacDonald: I would think, though, that the technology needed to compress it from 20 minutes to 5 minutes would be much more advanced.
Mr. McCauley: There is no question there are technological questions, but as I was saying, even when I look at the difference between a level 2 charger, which you will see in a home, and a level 3 charger, which is going into shopping centres or along auto routes, is a dramatic improvement in the technology.
As I said, the advancements in battery technology and increased range we have seen over the last four or five years have also been substantial as well, which, obviously, reduces the charging requirement on vehicles.
I'm very optimistic. When you look at the fact that there are approximately 23 EV models that are in the marketplace right now, almost every automaker has at least one EV model. I think you will see continued advancement in technology and improvements so that we can get to faster charging times. There is no question the demand is there for that. You're absolutely right.
Senator MacDonald: There has been a lot of talk about carbon taxes. Full disclosure: I do not believe in carbon taxes. I think they're a racket and a tax grab and are going to bleed money out of people.
But I want to know your opinion on carbon taxes. Do you believe they serve a function and actually work? If you do believe in them, is that tied to the fact you're trying to drive your technology?
Mr. McCauley: My view is there is no question that there is evidence, from what other jurisdictions have achieved, that carbon taxes can work.
However, as you heard in my submission, I still think that those carbon taxes need to be supplemented by a range of other measures, whether they be regulations, incentives for industry and partnerships with industry to advance technology. Although I am a former government regulator, I have never believed that regulations are the only answer to driving environmental improvement, and I don't believe carbon taxes are, either. I think we need a full suite of measures. There is no question that carbon taxes are really a price on carbon, whether they be through a tax, a cap- and-trade program or even a regulation. That's important, and needs to be the foundation for government action, but I think we need a whole suite of other measures to really deal with this challenge. I think it's an oversimplification for anyone, whether it's government, industry or an environmental group, to say all we need is a carbon tax.
Senator Massicotte: I share your pain on the pricing of carbon, and I'm flexible regarding the method. We had a witness yesterday from the Conference Board of Canada, a body that is highly credible. They do good work and have a good reputation. What I was left with from that discussion is that electric vehicles are very important, but they are marginal relative to the impact and they should be pursued if they achieve our objective. The objective is not to sell electric vehicles; it's to reduce greenhouse gas emissions, and if that's the objective, then the most significant thing we have to do from a regulatory standpoint is control the amount of CO2 coming out of that tailpipe. That is by far the most significant thing we should do, and the good news is governments are willing to do so.
Do you agree with that? He said that even in California, 3 per cent of the population drives electric vehicles, and even if you push them through incentives or some form of pricing carbon, you may get to 5 per cent. But at 5 per cent, the impact is marginal in the world relative to our near-term target of 2030. What's your comment about the conclusion I came to after talking to the Conference Board of Canada?
Mr. McCauley: I think there is no question the focus should be to have regulatory, policy and innovation measures that focus on what's coming out of the tailpipe. We shouldn't be saying that one technology is the answer.
If you look at what has been achieved by the auto industry since governments in North America started regulating fuel efficiency and GHGs from vehicles, we have doubled the fuel economy and GHG reduction potential of these vehicles using conventional internal combustion engine technology. There have been huge improvements through the light-weighting of vehicles and powertrain efficiency. I think the industry has really done an excellent job in getting us to where we are with conventional technology. I think that government should continue to make those regulations more stringent — and not unachievable, obviously — and really push the envelope with gasoline-powered engines for passenger vehicles to really drive further innovation.
But there is no question in the medium- to longer-term, that alternative technology vehicles, whether they be EVs or fuel cells, they will be the next big GHG reduction opportunity.
Again, I think that there are opportunities, whether they be regulations or incentives, to advance those technologies, but let's not forget that we have short-term emissions targets we have to meet. EVs will not meet those in the short term, but what we're currently seeing with conventional technology in vehicles is that there are opportunities to continue to drive even further efficiencies. That's the way I would answer that question.
Senator Massicotte: I accept that answer, the conclusion and the results. Some people would say that if you're going to incentivize anybody to get there, there is twice the amount of pollution being caused by a six-year-old vehicle versus a new vehicle. Maybe we should focus on those older vehicles, predominantly in freight, because freight represents such a large number relative to the whole. Maybe our focus should be on encouraging people to trade up to newer engines, which are so much more efficient.
Mr. McCauley: I think that's an excellent point. Existing fleets on the road, whether they be in the light duty fleet for passenger vehicles, or even heavy-duty trucks, present a huge challenge. The good news for consumers is that the average vehicle coming off the production line lasts 14 years. When you look at a lot of the older-technology vehicles on the road that are on the road for 10 to 14 years, they will continue to pollute at higher levels.
I actually agree with you. I think there are opportunities for incentives to encourage the changeover of fleets both for consumers and the trucking industry. It's not going to be easy because those kinds of programs are expensive, but I think it's an opportunity. Again, it can help on the economic opportunities side by seeing those other technologies in newer vehicles manufactured in Canada, and also to get us on the road to achieving those GHG benefits. You're absolutely right — existing fleets have to be a priority.
Senator Massicotte: Thank you.
Senator Patterson: I know that Pollution Probe partnered with the City of Toronto and Ryerson University to look at an electric mobility and prediction study. Can you give us a sense of what you found out there? What are the characteristics of people who adapt to electric vehicles, and where is the most potential for an EV market?
Mr. McCauley: I think that the major focus of that study was looking at the readiness and capacity of grids to accommodate increased adoption of EVs. As you said, part of that study was to look at the market segments where we anticipate that will occur. In the city of Toronto, for example, we, in working with Environics, were able to isolate even the neighbourhoods and the income ranges where the so-called early adopters of that technology were likely to occur. That work started about three years ago and just wrapped up last year. And clearly, the early adopters were in a lot of urban areas with higher density, where people were going to be using that vehicle for commuting and travel within that area.
What we're now seeing increasingly, though, is there is more interest beyond the early adopters. As EV prices come down, you're going beyond affluent consumers who are looking for an EV to a broader demographic. Clearly, with the initial work we did on that study, it really focused on where the early adopters of that technology are.
Senator Patterson: Would you comment about whether electric utilities are monitoring the uptake in the electric vehicle market, and whether they are adapting their distribution systems? Should they be promoting electric vehicles?
Mr. McCauley: We worked with 12 municipalities in Ontario and Alberta. The utilities we worked with are clearly monitoring their grids and making the investments that are necessary to accommodate increased EVs within their jurisdictions.
The conclusion of the study that I referred to is that we need to make sure across the country, particularly in urban areas where we're seeing increased EV deployment, that utilities work with broader areas in the industry, such as the auto industry, just to make sure that as they see increased demand happen across the country, the utilities continue to monitor their grids so that they can respond to charging capacity.
The conclusion of our work is that, in the short term, grids can accommodate increased demands. However, when we see the expected uptake in vehicles on the road, it's important that utilities and municipalities continue to do the research and monitoring to ensure they can accommodate the increased demand of electricity in those areas.
Senator MacDonald: Senator Patterson touched upon what I was going to ask you; namely, demand load at a peak time of day.
Look at Quebec; look at Montreal — lots of hydro power. If everyone in Montreal were to be driving electric vehicles tomorrow, and all the stations were in place to charge them, I would assume that the power grid system in Quebec would be able to handle the demand no matter what time of day.
Look at Toronto. Look at Ontario and the mess they've made out of power in Ontario, selling power under the rate of producing it, not being able to meet demand at heavy times of the day.
Right now in Toronto if every car were an electric vehicle, would the grid system in Toronto meet that demand? When do people recharge their vehicles? Do they recharge them the same way people fill their up their vehicles with gas? What are the peaks and valleys in a 24-hour period?
Mr. McCauley: The research indicates that approximately 80 per cent of EV owners charge overnight, at home. That is why the focus of our work was on neighbourhood grids. It is obviously important to ensure that if you have people plugging in their vehicles at home, you don't see transformers blow up. Problems happen, obviously.
The conclusion of our work, which largely focused on Toronto, Ottawa, Hamilton and Markham, is that the grids in those areas can accommodate the expected increase in EV charging requirements in the short term. But when you look at what's starting to happen with increased incentives and governments pushing and promoting EV adoption through incentives, it's going to be important as automakers respond to that opportunity and put more EVs on the market that we ensure in the future as we see higher penetration rates for EVs that there is grid readiness.
It's not a problem in the short to medium term, because we're still looking at less than half of 1 per cent of the fleet across Canada as being EVs. However, over the long term it's an area that we will have to be sure we can respond to at the local level.
The Chair: That ends our questions, but I have a few.
We heard some other testimony about technology for tailpipe emissions and that Canada has worked hand in hand with the U.S., which has improved tailpipe emissions tremendously in the last number of years.
Moving forward, we were told by one person that technology will continue to actually give us better tailpipe emissions standards, but that all depends on whether governments actually enforce the industry to meet those standards and use that technology.
Is there technology now that you're aware of to make tailpipe emissions better than they are today that's just languishing there, or is it still not developed yet?
Mr. McCauley: I would expect that there are still technology opportunities out there. That's one of the reasons why it's important that government set a standard or target and then let the marketplace decide what is the best technology and product to meet that, and incentivize innovation through a regulatory approach.
There really is a suite of technologies being used by industry now to meet very aggressive fuel-efficiency standards. I referred to improved aerodynamics and light-weighting the vehicles. It is phenomenal how the technology has improved. That's an area where Canada has a lot of expertise. We have industry in that area, and we have benefited from improvements in that area.
The other area is the use of computers — on-board technology. That's an area in a workshop that we had earlier this year where we had experts from the U.S. with some of our experts talk about what advances we're seeing in on-board computer technology that really enables even further improvements in fuel efficiency and GHG reduction.
There is a lot already being done, but there is no question there could be other opportunities that industry can see that we could see in vehicles. But it's important that those regulations continue to be made more stringent to realize that.
Very quickly, I agree absolutely with your point about the importance of enforcement. It's great we have strong standards. The evidence, as we know when looking at what's happening in the industry with a few other areas, shows it's important that compliance be assured and that enforcement actions take place when necessary.
The Chair: Earlier, Senator Massicotte asked about older cars and getting rid of them. I'm an old-car collector, so I perked up quickly to that. There are some we shouldn't get rid of.
Senator Massicotte: Yours, right?
The Chair: I'll use an example. I have a 1965 MGB that my wife and I took on a trip down the Oregon coast. I live in northern British Columbia. I get 38 miles to a gallon. There is not much on the road that gets 38 miles to the gallon. So when people talk about technology having come a long way, I wonder how that works. This is a carbureted vehicle — two carburetors — and it gets 38 miles to the gallon.
That's why I asked if there's better technology out there. That's my thought process.
Mr. McCauley: I agree.
The Chair: To me, there is a long way to go in tailpipe emissions technology. I don't know what that is; I'm not an engineer, so I don't know what that is. But there is that opportunity.
The other thing about all those types of fuels we've talked about is that it's similar to generation of electricity. You'll hear certain groups say that solar panels and wind turbines are all we need. It's part of the mix of a host of things that generate electricity.
With vehicles, it's much the same. Those people who commute directly in the city and never leave the city might have one electric vehicle, but if you ever think about leaving the city and going on a long trip — because I don't see charging stations along the TransCanada Highway for a long time — you need two vehicles: one that you can actually go on longer trips with and an electric vehicle parked beside it. Only a certain part of the population can afford that.
When you hook yourself into just an electric-powered vehicle, you're diminishing the opportunities to get around, which we all enjoy. Would you agree with me?
Mr. McCauley: I would agree. Those are excellent points. You need a suite of measures and not just a single technology. Even when you look at what's happening in a lot of urban areas with the demographics now, there is less demand for vehicles in some parts of the population.
Another area we can talk about is public transit and other opportunities so that you actually get cars off the road, because, obviously, that is a huge emissions reduction opportunity. It doesn't work for everyone, but that's why we need a suite of measures, as you said.
The Chair: Also, with respect to the delivery of electricity for electric vehicles, I heard you say the grid could handle it for now. We also heard that the grid across Canada — I'm not pointing at any province or territory — needs billions of dollars to bring it up to standard today, so when you think about that and you price all that in, it drives the cost of going to straight electric vehicles higher.
I don't know how many around this room have experienced building high voltage lines in their province. I have, and I can tell you one situation where the Crown corporation had a right-of-way, and we built larger lines on it because more people were moving to Vancouver Island and the Lower Mainland and you needed the higher voltage lines. At the end of the day, the Crown corporation had to buy 100 houses along the right-of-way which had been a right-of-way for 50-some years.
To just go out there and say, "Well, we can build more lines,'' is easy to say, but let me tell you, it is not easily done. It is something that doesn't take a couple of years. In some cases, it takes decades to get to that point. All those things have to be looked at, and I want to caution all of us.
The targets that have been set have been with us for quite a while, during both the governments of the Conservatives and the Liberals; I'm not saying one party or the other. It is 291 megatonnes.
By 2030, if you took out all the natural gas, all the fossil fuels, totally stopped — and let's remember the largest petrochemical industry in Canada is in southern Ontario — you start eliminating all those jobs and all those things that go along with that, the economic activity, and you still don't meet that target.
Can we meet that target by the way we're going now, or does it take more drastic moves to meet that target? And the targets after 2030 to 2050 are more stringent. So it's not just about buying electric vehicles. It's not just about generating electricity differently or not using natural gas or oil for anything. It's about people's habits and how they actually live their lives and changing that. Do you think you can change that by 2030?
Mr. McCauley: I'm very optimistic. When I look at the opportunity that we have in Canada with electricity, for example, where a large part of our generation is really clean electricity supply, and if you look at what governments are doing in accelerating that transition, not just for wind and solar but also for other forms of low-emitting electricity, we're really one of the leaders in the world with our clean electricity portfolio.
I think we achieved a lot and can achieve more. The biggest challenge will be transportation. Unless we take action across the board, we will not hit those targets. Transportation is really the challenge as far as we're concerned. The opportunities I alluded to in addressing opportunities for heavy-duty fleets, where there is a huge challenge, there are opportunities there and for passenger vehicles as well where we're seeing those opportunities. I am optimistic we can meet our targets, but I'm not going to diminish the difficulty. There is no question.
I think the government has taken a good approach with developing a pan-Canadian strategy. Pollution Probe participated in those consultations and made a number of submissions, and I'm reassured the government is looking across the board at all sectors with a priority on transportation to take action.
I think we made an excellent start, and I think we can hit those targets with the types of measures we've been talking about.
The Chair: I don't want you to talk about just electricity because it is not just about electricity. I mean, fossil fuels are engrained in our lives in many different ways than just electricity.
I'm always the optimist. I hope we meet those targets, too. Don't get me wrong. I'm not saying we shouldn't meet those targets and shouldn't do things better. I agree we should.
If you're convinced we can meet those targets in 2030, could you please do a little homework and come back to this committee or even file with the clerk what the cost of that will be? Don't tackle just electricity, but talk about the plastic industries and all the jobs that will go down the tube — all those things. As we were told earlier, some industries may not make it through this, so that's jobs. Give more of a pan-Canadian view of what's going to happen to meet those targets and what those costs will be. Then we can actually figure out how much that will cost every individual, how we will have to change our lifestyles and how you actually do that. That would be very interesting.
I appreciate your report and your presentation very much.
Mr. McCauley: Thank you, Mr. Chair. I will be pleased to do that.
The Chair: With that, we're adjourned.
(The committee adjourned.)