Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 21 - Evidence - February 16, 2017
OTTAWA, Thursday, February 16, 2017
The Standing Senate Committee on Energy, the Environment and Natural
Resources met this day at 8 a.m. to study the effects of transitioning to a low
Senator Richard Neufeld (Chair) in the chair.
The Chair: Good morning, colleagues, and welcome to this meeting of
the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is Richard Neufeld. I am a senator from British Columbia and chair of
this committee. I wish to welcome all those with us in the room and viewers
across the country who may be watching on television or online. As a reminder to
those watching, these committee hearings are open to the public and also
available online on the new Senate website at sencanada.ca. All other
committee-related business can also be found online, including past reports,
bills, studies and lists of witnesses.
I would now ask senators around the table to introduce themselves. I will
begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.
Senator Massicotte: Good morning.
Senator Griffin: Senator Griffin, Prince Edward Island.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Wetston: Howard Wetston, Ontario.
Senator Black: Doug Black from Alberta.
Senator Galvez: Rosa Galvez from Quebec.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Lang: Dan Lang, Yukon.
The Chair: I'd also like to introduce our staff beginning with the
clerk to my left, Maxime Fortin, and our two Library of Parliament analysts, Sam
Banks and Marc LeBlanc.
Colleagues, in March 2016, the Senate mandated our committee to embark on an
in-depth study on the effects, challenges and costs of transitioning to a lower
carbon economy. The Government of Canada has pledged to reduce our greenhouse
gas emissions to 30 per cent below 2005 levels by 2030. This is a huge
Our committee has taken a sector-by-sector approach to this study. We will
study five sectors of the Canadian economy, which are responsible for over 80
per cent of all greenhouse gas emissions. They are electricity, transportation,
oil and gas, emission-intensive trade-exposed industries, and buildings.
Today, for the thirty-second meeting of our current study, I am pleased to
welcome from the Canada Mining Innovation Council, Carl Weatherell, Executive
Director and Chief Executive Officer. Thank you, sir, for joining us and taking
time out of your busy schedule to testify. The floor is yours, sir.
Carl Weatherell, Executive Director and Chief Executive Officer, Canada
Mining Innovation Council: Thank you and good morning, Mr. Chair and
senators. First, let me thank you and the committee members for opportunity to
address you today. Our opening comments will focus on innovation, specifically
how innovation, CMIC and Towards Zero Waste Mining can contribute to a
low carbon economy.
Some of your witnesses have or are going to be speaking about research and
the need for research. We need to be clear that there is a significant
difference between research and innovation. Simply stated, research is the
creation and dissemination of new knowledge, while innovation is the creation of
value. Canada needs to commit to funding both activities; however, we do need to
recognize their differences and not promote one under the semblance of the
The mining industry in Canada is foundational to Canada's economy, providing
the raw materials that enable other sectors of our economy to flourish,
including high-tech, transportation, aerospace and defence, manufacturing and
As we move toward a clean economy, the need for raw materials produced from
mining will only increase. As an example, it is estimated that Tesla alone will
consume 5 per cent of copper production, or 900,000 tonnes of copper, for its
electric motors by 2030. This is but one example from one company for one
Innovation is not new to the mining industry. Our innovations include highly
complex industrial processes, which have required billions of dollars of
investment, to technology incorporated into the lunar lander. Much of this
technology development and associated investment occurs in metropolitan centres
such as southwestern Ontario, Vancouver, Saskatoon, Calgary and Ottawa.
The industry desperately needs innovation but adoption is hindered by its
capital-intensive nature; current stress- related, volatile commodity markets;
increased costs; and significant competition from other jurisdictions. For
example, in 2015, the global mining industry experienced record impairments of
$53 billion, far outstripping similar losses in the oil and gas industry for the
CMIC, the Canada Mining Innovation Council, was created with the endorsement
of federal-provincial-territorial ministers of energy and mines to create a
long-term vision, strategy and approach to encourage the mineral industry to
support more focused and coordinated research, development and innovation; to
better use the network of Canadian university and government expertise; and to
address the large competitive challenges faced by the industry.
Government and industry recognize that CMIC, as an arm's-length non-profit
organization, has greater flexibility in coordinating and implementing the type
of step change required by the industry that will maintain and increase its
CMIC is to mining and minerals what COSIA is to oil and gas, and
FPInnovations is to forestry. In fact, CMIC has a strategic partnership
agreement in place with FPInnovations, and we're discussing similar
opportunities with COSIA.
With our partners in the mining industry and the Mining Association of
Canada, CMIC created an innovation strategy for the industry, Towards Zero
Waste Mining. Towards Zero Waste Mining defines the future of the
industry in 10-plus years, focusing on the grand challenges common to the
industry related to energy, environment and productivity. Towards Zero Waste
Mining includes a business case, transformational targets, technology
roadmaps and projects in various stages of execution.
We have a copy of the business case and the integrated Towards Zero Waste
Mining technology roadmap with us today, and this can be made available for
your consideration through the clerk. I should mention that this simplified
version right here has never, to our knowledge, been created for the Canadian
industry or any industry globally. It's one of a kind — a first off.
CMIC incorporates an open-innovation business model that comprises members of
the entire supply chain, including academia, government and other laboratories,
start-ups, small- and medium-sized enterprises, Fortune 500 companies, companies
operated by indigenous peoples and mining companies cooperatively focused on
solving specific industry-defined challenges. Technologies from the information
communication technology, genomics, aerospace and defence have been identified
as potential solutions.
This highly collaborative innovation model accelerates technology
development, deployment and wide-scale adoption, and reduces the financial risk
for all collaborators.
I'd like to provide a couple examples from our technology roadmap that
directly address greenhouse gas emissions in mining operations.
Our underground mining technology roadmap is focused on moving the existing
underground mining operation from "batch'dom'' and carbon-based platforms to
continuous, smart, electric-based technology platforms. The impact on emissions
will be significant as we move the industry to a highly efficient, all-electric
Two projects that are currently under way include creating the world's first
guidelines for underground battery- electric vehicles. These guidelines will be
complete by March 2017 and will then move toward the creation of global
standards. The CMIC business model enabled this process to be completed in six
months versus approximately 24 months, or two years. A second project we're
about to launch this spring is aimed at accelerating the development and
adoption of battery-electric vehicles for underground mines.
The highly efficient all-electric underground mine will reduce the carbon
footprint by removing diesel-based fuels from underground operations. The
removal of diesel underground will also decrease, for example, ventilation
requirements and associated power consumption, a significant use of energy for
underground operations. One mining company estimates at one operation a 47 per
cent reduction in power requirements for ventilation alone as a result of moving
to battery-electric vehicles — using an electric fleet.
Our energy and processing group is targeting a reduction of energy
consumption in the processing cycle of mining operations by 50 per cent. In one
example, the process of crushing and grinding rocks consumes approximately 3 per
cent of the world's electricity — enough electricity to power Germany — of which
90 to 95 per cent is lost as waste. Our energy processing technology group,
composed of senior volunteers from mining and engineering companies, a federal
government laboratory, small- and medium-sized enterprise, and original
equipment manufacturers, has identified a technology that has the potential to
reduce the energy consumption by 50 per cent. The second phase of this project
is slated for completion in June 2017, after which we will be moving to a
prototype technology development and deployment. Our target is to have a
full-scale commercial technology available by 2021.
Our greatest challenge is the immense complexity of the innovation system in
Canada. The existing funding mechanisms to support research, development and
innovation — over 7,000 — are generally focused on research and academia,
restricted to select regions of Canada and are generally incompatible with the
requirements of mining- related innovation projects. As a result, innovation
investment and technology development in Canada is significantly impeded. The
end result is that a number of Canadian mining companies are placing
innovation-related investments in foreign jurisdictions.
As a nation, our international rankings in innovation have been dropping
steadily for over a decade. These results clearly show that our traditional
approach to funding innovation through this myriad of complex and disconnected
programs is broken. Thus the Government of Canada needs to make a strategic and
focused investment that is common in other countries, such as Australia.
We have a proposal to Parliament right now and we are seeking a direct
investment from the Government of Canada of $50 million over five years. This
will result in the development of technologies that will significantly reduce
energy consumption, greenhouse gas emissions, tailings discharge and water use.
These new technologies will be deployed in Canadian mines and globally. This
will increase foreign direct investment in Canada by international technology
companies, make Canada a global centre of mining innovation and increase
Canada's export market share for new and cleaner mining technologies.
The Mining Association of Canada has identified up to $145 billion in
potential new mine investment in Canada over the next 10 years. Through the work
of CMIC, we can help to ensure that this investment represents the most energy
efficient, low waste mines the country has ever seen. Zero emissions, fully
electric mines are possible within the next five years, but it will require a
concerted effort to make this happen.
The Canada Mining Innovation Council has been identified as the umbrella
organization to coordinate innovation in the mining industry, has a proven track
record and is the ideal arm's length organization to manage such a direct
investment and implement this visionary strategy. Thank you for your time, and I
look forward to your questions.
The Chair: Thank you, sir.
Senator Massicotte: Thank you, Mr. Weatherell, for your presentation
and for being with us this morning. In your presentation you talked about
looking for funding. I'll let you deal with the authority of those arguments and
so on. That's not our role. But let's talk innovation.
I'm interested in 90 per cent of the power that could go to Germany. Give me
a sense, what are you going to do in the next 10 years? What are you going to do
to save that 3 per cent of the world's energy?
Mr. Weatherell: One project I spoke of as an example was a new
comminution technology to reduce that by 50 per cent. Again, we're looking at
having the next phase done by June, prototype in a year, commercialized within
Senator Massicotte: You would save 1.5 per cent of the world's energy
Mr. Weatherell: The world's electricity.
Senator Massicotte: Tell me about that product. It's obviously quite
interesting. What is it, per se? Why does it work?
Mr. Weatherell: I'd like to back up. There's a second piece that's
more complicated. I'll go back to first principles.
The crushing and grinding of rocks is a highly energy intensive and energy
inefficient process that's basically using a mechanical approach to smash rocks
together. The typical way it works — this was described by a non-engineer — is
that you get a margarine tub, stick it outside, spin it around, throw rocks in,
there are balls in there and they crash together, and you put up to 20 of these
in a series, and then you end up with fine particles out the end. Because of
that highly inefficient process, it consumes a significant amount of energy.
The technology we're looking at is a totally new way of grinding. It's not
looking at these collisions. The simplest way to describe it is that it's a like
a spoke in the chain, that sort of technology. It's called a conical anvil
hammer mill. Again, it has been simulated and demonstrated. We just need to
prototype it. Estimates based on existing technology are a 50 to 60 per cent
reduction in energy consumption.
Senator Massicotte: This exists and is currently being applied in
other parts of the world?
Mr. Weatherell: No, it's being developed. This is what we're doing,
developing it from the lab in bench scale to prototype.
Senator Massicotte: Has it been proven to work?
Mr. Weatherell: We're at that stage now. The study we're dealing with
now is what we call the fatal flaws. Here are the technologies we have at the
bench scale. How do we solve them? That's where we're at right now.
Senator Massicotte: That would save 30 per cent of the world's energy
if that worked.
Mr. Weatherell: About 50 per cent of the 3 per cent, which is about
1.5 per cent.
Senator Massicotte: There are some large mining companies in Australia
and Canada. They must be super keen on this stuff and must be throwing millions
of dollars to get this going, are they not?
Mr. Weatherell: At this point they're not because it's in the initial
stages. Technology development in the mining industry has typically taken 20,
30, 40 years to happen. We do have mining companies there right now. They
typically do not invest in technology development. That's more the engineering
Senator Massicotte: Everybody is logical at the end of the day. If
they save millions of dollars, which they would, they would throw millions of
dollars at you in turn.
Mr. Weatherell: Yes, absolutely. The second piece of this, which is
very important, is that you mentioned mines in Australia and other companies.
There's an existing capital base, so this would not replace an existing capital
base. A mining project lasts 10, 20 or 30 years. The companies are not going to
go in and replace these mills. A second project is for low-grade energy waste
that comes out of the existing processes, and we're looking at technology
development to recapture that low-grade energy waste to apply to existing mines.
The technology you asked about, Senator Massicotte, is for new mines.
Senator Massicotte: I'm not an expert, but I wish you luck. I've done
a lot of venture capital in my life, and a lot of good ideas don't work but I
hope that's not your case. Thank you very much.
Mr. Weatherell: Thank you.
Senator Lang: I welcome our guest. Like Senator Massicotte, I was
intrigued by two examples that you brought forward with respect to going from
research into innovation, and hopefully into the practicalities of running a
Having personally worked around mines in a different life a long time ago, I
have some understanding of how it works and how on the ground it's so difficult
trying to meet all the objectives that you'd like to meet.
We've had a series of witnesses here from a number of organizations that are
looking at research and innovation, to the point it gets kind of confusing.
Who's doing what, who's reporting to whom, who's getting the money? At the end
of the day, will we have a product that will be of substantial use for the
general economy and for the environment?
That being said, in your comments you say "the Government of Canada needs to
make a strategic focused investment that's common to other countries, such as
Australia.'' What does Australia do different than we do?
Mr. Weatherell: That's a good question. I'm glad you brought it up,
Senator Lang. Australia has identified four sectors that are strategic to their
economy and made significant direct investments into those sectors.
I'll give you one specific example that happened recently. The Governments of
Australia and Queensland, the state government and the federal government,
collectively put up $20 million in 2015 to create an organization such as
ourselves to do the same thing we're doing. That's one example. They've also
invested over $100 million in centres to do technology development in areas
similar to what we're doing. We're working with these organizations in
Australia, but again they're doing strategic, focused large-scale investments
outside of universities and using third parties such as ourselves to do that.
Senator Lang: I want to follow up on this in the practicality of the
research and innovation. It would seem to me that a centre, and probably a
university centre, would be established by the mining association to consolidate
all the various research that's taking place in order to see how they can
implement it. I'm just going to go on that. In Yukon, we have a small college,
Yukon College, and we have a research and innovation centre primarily directed
towards the mining community to try and see what we can do to meet our
Colleagues, there's some substantial research under way that seems to be
quite promising that will do two things. It's going to be a better process for
the purposes of the environment, and on the other side of the coin, it is going
to be less costly for the producer. So if that happens, just like these two
examples you've given, obviously that's going to be of great benefit.
What I don't quite understand, and perhaps you can tell us on the financing
side, from Senator Massicotte again, is why the major mining companies that are
the producers, which will be the beneficiaries directly at the end of this if
we're successful, aren't stepping up to the plate with millions of dollars to
help and assist and put this together. Quite frankly, any money they put forward
they'll be able to use as a tax benefit as well. Perhaps you could comment why
we're not at that stage where they're putting in significant amounts of money to
encourage the government.
Mr. Weatherell: That's a great question. Actually, they are. They are
stepping up and they are putting in millions. As I alluded to in my comments,
some of these investments are being made in Australia versus Canada simply
because there's an existing matching mechanism that's already there. They get a
50 to 500 to 1 match right away. It already exists.
What happens in Canada is you end up with a myriad of colleges, universities
or other organizations knocking on the industry's door saying, "We want a
million for this, we want $500,000 for that and we want a quarter million for
this.'' They're constantly bombarded for requests for money. That's number one.
To the point you made in your opening comments, related to focus, one of the
reasons we were put in place — why CMIC was built — was to actually get this
collaboration among the research organizations and innovation, both at the same
time. We're working on that and we've been working on it for a number of years.
We've made significant progress in getting industry, SMEs, suppliers and the
research organizations aligned. In fact, we're involved in four, and encouraging
a fifth, centres of excellence in Canada related to research and universities
and making sure the focus is on mining challenges.
To get back to your question, they are investing. They're investing in us and
projects right now. In the battery electric vehicle project I mentioned, two
companies alone are putting up between $2.5 and $5 million each because it's
directly relevant to their business. They are stepping up to the plate if it's
relevant to their business. What we're doing is bringing that focus and
relevance to the business of mining.
Senator Black: It's very important work that you and your organization
are doing. That was a very helpful presentation this morning.
To help us in the work we're doing, would you please tell us, in your view,
the three things we could recommend to be helpful to the work you're doing?
Mr. Weatherell: Actually, that's one question I wasn't prepared for,
Senator Black. Again, I would focus on one recommendation, and that is to focus
investment in organizations such as ours, that are recommending that that
happen, simply because it's happening in other jurisdictions. It's happening in
Canada with other sectors. It's not happening with mining.
Senator Black: Fine, let's just talk about that. The one
recommendation would be, "Give us additional funds to advance our innovation
agenda.'' That's what you're saying to us?
Mr. Weatherell: Yes.
Senator Black: You say you partner and work with COSIA. You will have
to refresh my memory as to whether COSIA has any government funds.
Mr. Weatherell: No, COSIA does not have government funds at this
point, but again, I think we have to be very careful about comparing apples and
oranges. If you look at the oil and gas industry, the margins in the past five
years or so were significantly higher than hard rock mining. A greater
capability to fund those projects at significant levels is what COSIA is
undertaking. That's changing now. There's a bit of a difference in terms of
margins and capabilities.
Senator Black: Very well, thank you.
Senator Seidman: Thank you very much for your presentation. On your
council's website, it says that CMIC is seeking a five-year, $50 million
investment by the federal government, which will be matched by industry to
accelerate implementation of the TZWM innovation strategy.
Would you be able to tell us a bit about the kinds of projects? I know you
talked a bit about what you're currently doing.
Mr. Weatherell: Absolutely.
Senator Seidman: But futuristically, in wanting this kind of
investment, what is it you're thinking about?
Mr. Weatherell: I gave you a couple of examples. We have basically
four portfolios: exploration, underground mining, processing energy and
environment. I talked about a couple in underground mining and I talked about
one in processing so I'll hit the other ends and come back to innovation and
processing as well.
In exploration, our exploration group created a technology road map for 10
years. The next part, which we're fleshing out right now, will be ready to have
a project defined in 2018, and that is: How do we find deposits in Northern
Canada undercover? Typically, they're 300 metres or so down, but how do you find
those deposits with superficial methods, versus going up and drilling all over
the place? This is looking at technology such as geochemistry and genomics,
even. There's potential for genomics technology. That's the key focus in
In underground mining, a third project there is mechanical cutting. I talked
about drill and blast, where you drill holes, stick in explosives and blow it
up. The industry would like to go to mechanical cutting, where you're
mechanically cutting rock. The challenge in Canada is the rock is too hard and
there's no technology that exists, so we're doing a pre-feasibility study that
we're about to launch to look at how we can accelerate the development of
technology to cut that rock faster in Canada. We're working with companies in
Sweden and Canada.
In the processing area — and this is a really exciting one — one of the
pieces of processing is flotation, where you get this finely ground material,
you add chemicals to it and it floats and concentrates it. Right now, there are
chemicals used that are hazardous to the environment, health and everything
else, so we're working with a consortium based out of Quebec that is looking at
creating bio-flotation reagent, again, using molecular biology and genomics. It
would create a whole new bio-industry for the mining industry. That's, again,
another potential project.
In the environment space, we have two projects right now. One is what we call
the knowledge hub. Essentially, whenever a mining project goes forward, there
has to be baseline water quality monitoring that's done, with water quality data
submitted to the relevant jurisdictions — federal-provincial-territorial — and
that data is available, but it's not easily available. It's really hard to find.
It's really hard to get. Working with the Province of B.C. and Geoscience B.C.,
we now have water quality data available, geospatially located in the province
of B.C., that is available to whomever. It's openly available, and I think there
is about 10 million data points available now; just open and transparent access
to water quality data.
The last project in environment we're about to launch — and there are others
— is part of the mining operation. A lot of them are in remote areas. Mining
companies are obligated to go and monitor water quality. Typically, they will
fly somebody up if it's in a remote area, they do grab samples in a batch, send
it back to the lab and do the analysis. They are snapshots in time. We've
defined a project and identified six potential companies and technologies
globally, two of which are in Canada, actually, that will change that water
quality monitoring to real-time remote. Your water quality sensor, for
everything in schedules 4 and 5, will eventually, in five to 10 years, look like
this and you will be able to access it on your iPad.
The first company we're working with is a start-up out of Calgary using
The Chair: Senator Seidman, I'm going to put you on the second round.
I've got a lot of questioners. I'm going to start changing the process.
Senator Griffin: Thank you for being here. In your brief, you
specifically mentioned what the Government of Canada can do for you, and Senator
Black was also talking about this. What other economic instruments would be
useful to the mining industry, in addition to the $50 million you asked for over
I'll give you a heads-up that the next part of my question is in terms of
regulatory instruments, because you did mention there were problems doing
business here compared to Australia, for instance. What regulatory instruments
do we have in Canada that could be changed or assist?
So further on the economic instruments and then what regulatory instruments
would be useful to you?
Mr. Weatherell: Great, thank you. I'll hit the regulatory ones first.
The Canada Mining Innovation Council is focused on innovation, and the
regulatory piece is handled by the Mining Association of Canada, so I would
refer to MAC on that. They're the experts and they deal with anything regulatory
Regarding financial instruments, I'll give you a specific example: technology
prototyping and testing. Battery electric vehicles, for example, are very
expensive. Mining companies would love to see some sort of program where they
could offset the costs of purchase, testing and prototyping battery electric
vehicles underground so they're not spending $15 million or $20 million of their
own to make sure it works before they buy an entire fleet.
National Resources Canada in their new energy innovation demonstration
program has something like that. That's number one. Number two is technology
prototyping and demonstration, like this crushing and grinding technology, for
example. If we're not hitting up VCs, engineering companies or others, it would
be nice if there was a Canadian fund where we could actually go and do this
that's relevant to how we operate.
There are some existing mechanisms but unfortunately they're not amenable to
how we're operating right now, which is part of the challenge. Those are two
Senator Fraser: Thank you. This is all fascinating. I have one quick
clarification for the new crushing thing: What did you say that was called?
Mr. Weatherell: An anvil-hammer mill.
Senator Fraser: Shoving things into a funnel?
Mr. Weatherell: It's more like a chain-and-spoke.
Senator Fraser: "Fully electric mines are possible within the next
five years.'' I grew up in a mining town, and if you can do that, that's going
to be enormous. But I'm assuming that a fair number of these new mines would be
in the North?
Mr. Weatherell: Yes.
Senator Fraser: Or in fairly remote territories. Where will you get
Mr. Weatherell: In remote areas, there are a couple of options. Right
now, the existing diesel-based generators is first one. Second is to run a
river, if it's feasible. I know one mining company is looking at run-a-river
project in Nunavut. Third, although it's a lot further away, is SMR, which is
"small and medium reactors'' — nuclear reactors. That's eight to 10 years away.
Right now, it would be diesel generators.
Senator Fraser: Are you counting the diesel-based emissions from the
production of the electricity when you say that we would have zero-emission
fully electric mines?
Mr. Weatherell: That's just the underground piece.
Senator Fraser: I'm assuming that's net zero emissions after you
recapture all that waste energy.
Mr. Weatherell: Yes.
Senator Fraser: I'm mystified by the concept of applying genomic
technology to mining. You talked about bioflotation. What on earth is that?
Mr. Weatherell: It's very interesting. Studies have shown that metal
particles in flotation circuits, frothing with all sorts of chemicals, are
actually surrounded by bacteria. The idea is: Can you engineer or modify these
bacteria so they selectively float the minerals on their own, without the
chemicals? That's one example. This is a project that the University of Laval,
the NRC and COREM in Quebec City are focused on.
I talked about the water-quality sensor. For example, a protein in a
bacterium will emit electrical signal in response to an external influence, such
as a copper or cyanide ion in water. By genetically modifying these bacteria,
you can have them react to different anilides in water, for example. That's what
this company in Calgary is working on.
Senator Wetston: My confession, Mr. Weatherell, is that I studied hard
rock mining at Mount Allison University over 45 years ago. The mine you are
talking about sure sounds a lot different than the first one I went down. That's
probably why I left the profession.
Productivity is a big challenge in our country, in many areas, not just
mining. I think you are alluding to that when you talk about innovation, and I
think we've fallen behind for a number of reasons and continue to do so.
Other than what you are talking about today — and I have a two-part question
that won't take long — talk to me a bit about the productivity challenges in
Mr. Weatherell: The simplest one is underground mining. Productivity
in underground mining is estimated to be about 24 per cent. Once you get deeper
mines, you have to send equipment and people, and they have to go to locations
and find equipment. If you're doing blasting, you have to evacuate the mines.
It's highly unproductive.
By doing things like getting rid of blasting, you don't have to evacuate
mines. In the case of mechanical cutting, you're not using explosives, so there
are fewer hazards. Also, if you are using smart information communication
technologies enabled, you can increase productivity as well. There are examples
where it has been increased by 400 per cent.
Also, you can benefit just in the mining process. When you are moving
material from underground to the surface, you sometimes have what is called
oversize; when you are moving material, it gets stuck, and that can take 6 to 20
hours to remove. We are looking at technology that will reduce that to five
In underground mining, there are a lot of really good examples for that.
Senator Wetston: Australia. In my opinion, they have done a lot of
good things in relation to developing national programs along with the States.
My best example is a national securities commission, which we don't have in
Canada. I will not go there, so please don't fire anything at me, but I want to
talk about that for a moment because it's an important capital-raising component
of investment in countries — the predictability, consistency and efficiency.
When I look at your example of what they've done in Australia and think about
Canada, why is it that you think — for example, the $50 million that you are
asking for from the federal government — why are you not asking for that from
the federal and provincial governments? I think that was alluded to a moment
ago. Why is that not the case? If that is not the case, do we have a problem
with respect to the competition that exists between provinces and the federal
government, due to the fact that we have to spread all of the benefits across
the country, which is a positive thing in some ways but might not allow us to
have a national mining policy of some short that would allow for the kind of
investment from industry and government to promote the sector, which has gone
through a very difficult time with commodity pricing in the last five years — we
are well aware of that — and can you respond for me?
Mr. Weatherell: Absolutely. That's a great question and good point. We
are starting at the federal level because we are a national organization. A lot
of organizations we work with are provincially based, so we are seeing
provincial investments. Again, we are providing the focus and they are being
invested in by provincial entities to break down some of the barriers and silos.
One good example is in Ontario. The Ontario Mining Association's strategy now
consists of zero waste, zero productivity, zero harm. They are following our
lead. Ontario is following the national lead on innovation for the sector.
We are getting there; we're not 100 per cent, but we are seeing that move.
We're starting with the federal government as a signal to say "this is
important,'' and other provinces and territories are starting to line up.
Senator Galvez: It was very interesting and I applaud your initiative.
If you attain your goals, it will certainly be for the benefit of all Canadians.
Coming from a research background and being a researcher myself, I was a
little confused on what you said about needing more research and needing ways
for being effective and applied.
I'm aware, and I know because I have participated in this contest of Genome
Canada, Genome Quebec and Genome British Columbia, so I am aware that millions
of dollars have been allocated over the last five years in genomic research for
exploration and exploitation. From NSERC, there are the strategic grants and
CRDC, which are collaborative and match funds — and no need to match funding —
and there are millions of dollars that have also been given through NSERC.
Moreover SSHRC, which is the social part of NSERC, right now they just funded
a network of excellence for mining and to help them with the interaction with
communities. Although mining is not a sustainable activity, the money that is
produced by mining can help in a sustainable activity in the community.
Last, you have grasps and grabs, so can you please tell me what is not
working? What is the obstacle?
Mr. Weatherell: That's a very good question. It comes back to what
Senator Wetston had talked about before, which is the slice and dice; things are
not totally collaborative.
I would like to back up and let you know that I'm chairing a group across
Canada of volunteers who are trying to push genomics and genomics-based
technology into the mining industry. This includes Genome B.C. There are people
from Genome Canada and the NRC. We are trying to focus some of these activities
There are a couple of pieces here. First, you mentioned a couple of programs.
I have dealt with all of them. Those are five, and each of them have several
programs, NSERC, et cetera. Then SSHRC, CFI and then CFREF, et cetera. That's
the challenge: There are too many of them. They are disconnected, they don't
necessarily work together and they focus more on academic issues than business
Senator Galvez: I challenge that. That's not true. From our side, we
are given directives; we are given criteria. We have to match what the companies
want, otherwise we don't get the money.
Mr. Weatherell: I will give you an example related to genomics. It is
a perfect example that just happened a few months ago. One of the projects I
mentioned — bioflotation reagents— with this group out of Quebec. They applied
to LSRP program grant from Genome Canada. We were put a lot of effort into it
and had a lot of industry behind it, and it was turned down. It was turned down
because it was not academically sound, although it was earth shattering for the
business of mining. There are a number of challenges.
I wrote a six- to eight-page white paper for Natural Resources Canada on some
of the challenges with funding programs in Canada. There are a number of
challenges. I have personally been involved, and so has CMIC, in a number of
existing granting organizations, proposals and processes, and there are
challenges. There are many challenges.
Senator Mockler: You have a very good reputation so I'll start with
We all know that Canada enjoys a role as a global leader in mineral
exploration, mining and knowledge-based services and technologies and I know you
play an important role in that. When you answered Senator Galvez, I would like
to have more detailed information on your statement, if you can. But with that
said, I know that you have been very instrumental in Eastern Canada in the
mining industry. Particularly, I know a few cases in the New Brunswick area. My
question is: With the changes that we've had with the government in the U.S., do
you believe that Canadian governments must adjust to their emission reduction
goals, because it will have an impact on what you do, in light of the new U.S.
administration? And should we slow the pace of emission reductions, from your
Mr. Weatherell: I'm going to have to plead ignorance on that. Again,
our organization is focused on innovation. We're not targeting policy related
issues whatsoever. Unfortunately, I would have to defer to the Mining
Association of Canada for that one.
Senator Mockler: You have no comment on it?
Mr. Weatherell: Not really.
Senator MacDonald: I have a clarification and then maybe a question.
You said in 2015 that the global mining industry experienced record impairment
of $53 billion dollars. That's a pretty frightening number for investors, I
Mr. Weatherell: Yes.
Senator MacDonald: Could you clarify that? What do you mean by "record
impairment''? Is it capital losses, writeoffs?
Mr. Weatherell: There are a number involved, and I can provide a full
report to the clerk if necessary from PricewaterhouseCoopers. I should clarify
that's $53 billion just with the top 40 mining companies; it's not the entire
industry. Over the span of five years, the total is $200 billion in impairments.
Some of these include writedowns, capital loss, et cetera. It covers a broad
range of things and it's scary for investors.
Senator MacDonald: I would assume this applies in a uniform way in
Canada? We are not exempt from this.
Mr. Weatherell: No, absolutely not.
Senator MacDonald: So when it comes to getting investment from the
private sector in the mining industry to pursue some of these things, in light
of the investment environment, and in light of what Senator Mockler referred to
in terms of what is going on in the U.S., are we pushing a rope uphill here?
Mr. Weatherell: Can you clarify that? Pushing a rope uphill in what
Senator MacDonald: In the sense of are we being realistic to be able
to get the investment we need to pursue those goals? Is private industry really
going to step up when they are losing this type of money in these sectors?
Mr. Weatherell: The answer is absolutely yes, and they are stepping up
for a couple of reasons. Number one, I gave examples where they are actually
making investments. If you look at multiple challenges the industry have from
being able to find deposits or complexity of declining rates and all the way
down to social licence, those are collective issues that interest driving some
of the challenges and impairments. The industry has realized and recognized
that, and they are coming to the table and everything we have in this plan comes
from industry. They are defining this.
I don't think we are pushing a rope uphill. They are looking at how to change
our business. I will quote a chief operating officer from a large mining company
in Canada who said that if we don't change the business of mining, we won't have
a mining business. And this is the blueprint for trying to do that.
The Chair: We'll go to second round, and I will give each of you one
question and we'll see how that works out on the time.
Senator Massicotte: You also talked about other technological
solutions that would help a lot in your report. What else should we consider
that's earth shattering? We are in the mining business here. But what else would
be important in your mind?
Mr. Weatherell: In terms of technologies? I alluded to a couple. We
are looking heavily into genomics, aerospace and defence. We've identified a
defence weapon that could be used to fragment rock. We identified technologies
in aerospace that are electric-based for removing coatings that could be used to
fragment rock. I have had discussions with people from the Institute for Quantum
Computing who have identified quantum encryption techniques that could be used
to expand the capability of monitoring and boreholes. We have had initial
discussions with NINT out of Alberta about the applications of nanotechnology.
We have an existing project with SNOLAB in Sudbury looking at their massive data
manipulation and handling.
To us, it's open. I think back to Senator Galvez's question, and there's
existing technology out there and we don't have to start at research. We can
find what already exists in an industry and bring it back and disrupt that
linear chain of technology development. We don't have to start at research. We
can start somewhere down the line, disrupt it and iterate very quickly. We have
actually done that in our exploration efforts.
Senator Lang: I have a general question that Senator Massicotte
referred to. As we know, the federal government has committed itself to reducing
emissions by 30 per cent below 2005 levels. By 2030, according to Environment
and Climate Change Canada, the emission gap to reach this goal is 219 metrics
tonnes of carbon dioxide or equivalent. The question to you as an organization
is: From your knowledge, your organization and the members of your organization,
do you believe this target is achievable and exactly what are you going to be
able to provide as an estimated goal to contribute to the 219 metric tonnes of
carbon dioxide equivalent?
Mr. Weatherell: I will answer that in two pieces. First, anything
related to carbon reduction and policy issues, that's the Mining Association of
Canada. Our targets are on the business whereas GHG and CO2 were
secondary targets. How the industry will address that, MAC has already written
position papers on that. I would refer to that.
We are doing some initial calculations on our comminution technology that by
itself will potentially reduce emission of GHGs by about 20 per cent. The mining
industry itself, in 2014 I believe, accounted for only 1.1 per cent of total
emissions in Canada. Does that help?
Senator Black: You referred to a memorandum that you have prepared in
respect of problems with funding programs. Could you provide that?
Mr. Weatherell: Absolutely.
Senator Black: That could be helpful because in view of the excellent
questioning of my colleague Senator Galvez, I have taken the conclusion that
money is not the problem. There seems to be enough dedicated money, but getting
that money out in a focused meaningful way seems to be the problem.
Mr. Weatherell: Exactly, precisely.
Senator Black: Does your paper address that?
Mr. Weatherell: It talks about some existing challenges from
disconnects at the policy and government level all the way down to process.
Senator Seidman: It's interesting because we have heard, in
questioning witnesses on several committees now, about silos in R&D. The health
field, which I know very well, is a prime example of this ongoing complaint.
However, we have also heard from basic researchers in universities that far
too much of the research monies are going to applied research. You know, there
are these contradictions, so it would be helpful to try to understand your
perspective and what your key complaints are. I think Senator Black just asked
you to submit this memorandum to us, which might be very helpful.
You did answer my question in revealing, I think, five key areas you are
working on, and key projects in those areas. So my question would be: How do you
prioritize, as an innovation council, all of the vast numbers of ideas that must
Mr. Weatherell: That's great. Basically, part of that goes to how we
operate, so I'll take 30 seconds or less to explain that.
We have our technology groups in these four areas. It is chaired, typically,
by a vice-president from a mining company and we surround them with experts and
senior people in the industry. What they do is define the technology road map,
the future state, where the technology gaps are and the potential projects, and
then we go and find who can deliver projects.
We don't typically take unsolicited proposals. It's a very focused thing:
This is what we need to do, so how do we solve it? What we will do to identify
potential delivery agents, for example, we'll have open workshops where we
invite people to present ideas, et cetera. A couple of weeks ago we hosted an
event with Western Economic Diversification Canada, Foresight B.C. and a VC,
presenting some of these challenges to the SME community. "Here is the challenge
the industry has: Do you have solutions? Come and talk to us.'' And we've
identified two companies. It's a little bit of a different approach.
Senator Seidman: Thank you.
Senator Galvez: My colleagues asked you my question, but I have
You have mentioned that these technologies will be applied to new mines.
However, I'm very worried about all the residues and waste that are still being
produced by all of the operating mines, and some of this technology applies,
like bio-leaching. I will explain to you what bioleaching is over tea.
It can be applied to these, and moreover, I was in South America. You know
that many Canadian mines are operating in South America and actually, they are
going to leave Mexico because of all the trouble that Mexico is having, and they
are going to move to Chile, Bolivia, Ecuador and Peru.
You have a lot of new businesses, markets and development to do over there
and they are very worried about the waste. You said something like 90 per cent
of what you extract becomes waste, but it still contains some metals, like
copper and zinc. Would it not be smart to also direct some of your technologies
to further extract the metals from the residues?
Mr. Weatherell: Absolutely.
Senator Galvez: Or recycle, or reduce?
Mr. Weatherell: Absolutely. I just gave a snapshot of a couple of
projects — not everything — but tailings processing and repurposing has actually
been identified by our technology group as a key area. There are challenges
related to that, especially with environmental permits, et cetera, and there are
technology challenges; bioleaching is absolutely a prime candidate for dealing
Senator Galvez: Just a correction, because he said it was going to be
applied to new mines, so you're saying it's not only new mines?
Mr. Weatherell: Both.
Senator Wetston: You talked about diesel in the North. We've heard
testimony about storage, and the opportunities for storage. We realize it's an
underdeveloped area in the sense of providing better sources of generation; that
is, cleaner sources of generation. Can you talk to me a bit about what you have
been thinking about in storage for the North, if anything?
I know there are a lot of developments, like Tesla's Powerwall, for example,
is very expensive and will run a house for a whole day, but obviously that won't
Nuclear, obviously, is an option, but you say it's 10 years away. We were
looking at nuclear 10 years ago, so that means it was 20 years away.
What's your thought about storage and providing a reasonable opportunity for
alternative sources of energy in the North?
Mr. Weatherell: At this point, we are not looking at storage
specifically. We are just looking at changing the fundamental operations first.
Storage would be one of the next steps. Unfortunately, we are not doing anything
Senator Meredith: Thank you for being here this morning. I apologize
that I missed your presentation, but I just picked up on page 3: "With our
partners in the mining industry and the Mining Association of Canada, CMIC
created an innovation strategy for the industry toward zero waste mining.''
Speaking to one of my colleagues yesterday who has been in this industry for
a while, we were having a conversation with respect to innovation in Canada and
the fact that sometimes we neglect to utilize the technologies that are here,
and we look outside. How is your council encouraging working with the Ministry
of Innovation and, obviously our Minister of Science, to ensure Canadians get a
crack at these cutting-edge technologies, to work within the mining industry and
ensure that jobs are kept here and are protected?
As we all work toward this, we met with the minister last night and we were
talking about the fact that all industries have to work together, in terms of
corporate Canada as a whole in terms of whether we are going to reach our
emissions targets and so forth.
So regarding the innovation that's created in Canada, how do we maintain that
in Canada and make sure the mining industry here is utilizing that technology?
Mr. Weatherell: I mentioned one example of what we're doing: We are
reaching out to existing funding organizations that fund SMEs in Canada. We're
targeting a lot of SMEs in Canada, and we have small- and medium- sized
enterprises in Canada that are members of our council, and we are focused on
them, and they are competing directly against OEMs in other countries. We are
encouraging them. Again, it's about reaching out and networking; we're trying to
keep things as Canadian as possible.
The Chair: Thank you very much, Mr. Weatherell, for your excellent
presentation. I want to thank the committee for some excellent questions and
also you for some great answers.
If you could, for any information that you send, please send it to the clerk
and he will make sure that all members get a copy of it.
Thank you, again, for taking time out of your busy schedule.
I want to remark on one thing regarding nuclear. We've heard testimony that
it takes 20 years to get a site, so 10 years is a little optimistic. I mean,
heaven only knows that could change but this is just to note that the average
time we have been told, as I recall, is 20 years.
Thank you very much.
We will suspend for a few minutes because our next presenter is via video
conference and it will take a few minutes to set up, so please don't run away on
Welcome to the second portion of this meeting of the Standing Senate
Committee on Energy, the Environment and Natural Resources. We are continuing
our study on the effects of transitioning to a low-carbon economy.
For the second segment, I'm pleased to welcome, by video conference, Jennifer
Winter, Assistant Professor, School of Public Policy, University of Calgary.
Thank you very much for joining us today. We look forward to your
presentation. Once your presentation is complete, there will be questions from
the senators. The floor is yours.
Jennifer Winter, Assistant Professor, School of Public Policy, University
of Calgary, as an individual: Thank you very much, and thank you for
inviting me to speak on this very important issue. It is a privilege to speak to
Canada faces a challenge in reducing emissions and simultaneously protecting
the quality of life and economic growth that we enjoy. Adaptation to, and
mitigation of, climate change is a complex problem and the various policy
solutions should be weighed very carefully.
From the perspective of the atmosphere, the source of the emissions does not
matter. A tonne is a tonne is a tonne, regardless of whether the emissions come
from Alberta or Ontario, the oil sands or an auto plant.
Given this, the best policies to reduce emissions are those that ensure the
lowest-cost emission reduction options are chosen first, regardless of where in
Canada these emissions come from.
The policy options we have available are pricing, regulation or a combination
of both. Any policy action has costs and benefits, winners and losers and
political consequences. From an economic perspective, we should, where possible,
strive for policies that achieve the maximum benefit at the minimum cost. This
is why economists are almost universally in favour of emissions pricing via
taxes or a cap-and-trade system.
By contrast, political feasibility often depends on the visibility of costs
and benefits, which is why regulatory solutions are often preferred due to their
less explicit costs.
Pricing mechanisms create an incentive for individuals and firms to change
their behaviour and choose the lowest- cost emissions reduction pricing option.
This may be choosing not to emit at all or to invest in technology to reduce
emissions. The lowest cost way to reduce emissions is for everyone to face the
I want to emphasize, however, that emission pricing is not a silver bullet.
In particular, pricing of emissions requires that emissions be easily
measurable. For those emissions that are not easily measurable, a regulatory
solution may be a better policy option. An example of where a regulatory
solution may be better is in fugitive emissions from oil and gas production.
I have so far spoken in generalities, but I was asked to specifically comment
on how the economic benefits of Canada's oil and gas sector can be balanced with
the need for credible policies to reduce emissions.
I'm afraid my answer may seem simplistic to some, but I believe we are
already there. Environment and Climate Change Canada has an estimate of the
social cost of carbon for 2016 of $43 per tonne. What the social cost of carbon
measures is the cost associated with each tonne of carbon dioxide equivalent
emitted in 2016. It can also be thought of as the benefit associated with not
emitting a tonne of carbon dioxide equivalent.
Alberta and B.C. have carbon taxes, which are levied on the combustion of
fossil fuels. Quebec and Ontario have a cap-and-trade system, and the new
federal carbon tax will mean there is emission pricing across Canada. The prices
associated with these systems are lower than the current estimated cost of
emissions, the social cost of carbon that I mentioned. But by 2022, provinces
with carbon taxes will be pricing emissions in line with the social cost of
carbon. However, unless Ontario and Quebec significantly tighten their emissions
caps, prices are not likely to rise to the same level. The federal government
has an important role in ensuring the price of emissions is harmonized across
From my perspective, Canada already has credible environmental policies in
place, or has committed to put them in place. Given that we have committed to
pricing emissions, any economic development — no matter in what sector of the
economy — is entirely appropriate. If a company finds it profitable to invest in
Canada, even in the presence of a $50- or a $100-per-tonne carbon tax, there is
no other policy action needed.
In fact, there may even be scope to eliminate pre-existing, unnecessarily
costly approaches to lowering greenhouse gas emissions. These are policies that
have a higher cost per tonne than pricing does.
For example, the Ecofiscal Commission report on biofuels found that the cost
per tonne of emissions reductions from biofuels ranges from $128 to $596 per
Other policies may even increase the cost of our environmental policies,
further sacrificing economic benefits. A key principle of economic efficiency is
treating all individuals and all firms the same so that they face the same
incentives. Policies such as phasing out coal or the cap on oil sands emissions
effectively create a two-tier system, where specific types of economic activity
are favoured over others.
In the case of the oil sands cap, the economic activity and emissions
associated with that economic activity are valued up until the 100 megatonne
cap, at which point the economic activity has zero value and avoiding an
additional tonne of carbon dioxide has infinite value.
This type of policy eliminates any consideration of the relative costs and
benefits of the economic activity versus the reduction in emissions.
An issue often raised in the context of meeting Canada's emissions targets is
that Canada is a small economy and a small contributor to global emissions. That
doesn't mean we should do nothing, but there are concerns about how acting alone
to reduce emissions will affect the economy.
One major concern is carbon leakage, where economic activity leaves for a
country with less stringent environmental policy, reducing economic activity
here without reducing global emissions.
A second concern is that policies increase the costs of Canadian firms,
making them less competitive in a global market. In this situation, there may be
scope for additional complementary policies to mitigate these effects. For
example, B.C. has lowered corporate income taxes, whereas Alberta is pursuing
output subsidies for energy-intensive and trade-exposed sectors. The output
subsidies lower firms' production costs, preventing leakage, but keep the
incentive of carbon pricing.
That said, however, even a $50 per tonne carbon tax is not exceptionally
burdensome on the oil and gas sector. To illustrate, for the oil sands overall,
average emissions are 65 kilograms per barrel. At $50 a tonne, that's $3.25 per
barrel in additional costs. For perspective, the National Energy Board estimates
the cost of no additional pipelines at $10 per barrel.
The costs of a carbon tax are swamped by the benefit of additional
I would also like to point out the sensitivity of Canadian oil and gas
production to global prices. These prices are beyond our control but are a
significant determinant of the amount of oil and gas production in Canada,
economic growth and our corresponding emissions. This means that the Canadian
government should be flexible in its emissions targets, as Canadian emissions
are dependent on some factors beyond our control.
To conclude, I offer my three main points. First, there is nothing special
about oil and gas emissions; a tonne is a tonne is a tonne. Prices should apply
uniformly to all sectors. Second, some sectors, like oil and gas, may face
adverse competitive implications from pricing emissions. Other complementary
policies, like Alberta's output subsidies, can address this without exempting
the sector from pricing. Third, Canada is a small, open economy. Therefore, we
should approach our emissions targets flexibly.
Thank you for your time, and I look forward to your questions.
The Chair: Thank you for that presentation. We'll now go to questions.
Senator Massicotte: I quite enjoyed your presentation. You summarize
quite well how the economy works, how it should work and how we should be
viewing this challenge we face as citizens of this world.
In pure economic theory, you say "develop a price that reflects our policy
objectives,'' which means we want to get to 1.5 Celsius; therefore, don't treat
anybody differently. The market works very well. Capitalism works well. Don't
penalize the oil and gas industry. They should pay like everybody else. I think
Environment and Climate Change Canada came up with a social cost of $46 per
tonne. But you have people like Shell that came out a few weeks ago to say that
to get where we want to go, given the policy objectives, it will cost more like
$200 per tonne. Then we had a professor saying we should go probably as high as
150, but given the resistance by the Canadian population, we should couple that
with regulation, even if regulation is less efficient than pricing carbon.
Having said that, what if it's proven in a year or two from now that $46 or
$50 per tonne is not adequate? Under your proposal, you're saying let it be
whatever price is necessary to reach policy objectives, and let the chips fall
where they may, with everybody paying the same price for carbon. Am I correct in
saying that? You make reference to $46, but maybe it's $100 per tonne or $150.
Maybe Shell is right and it's $200 per tonne. You're saying adjust to that
reality to meet our policy objectives. Am I correct in saying that?
Ms. Winter: Yes, that's correct. Environment and Climate Change Canada
has the estimate of $46 per tonne, and that's their central estimate. There is
some uncertainty as to the potential costs and benefits of climate change, so
they also have a ninety-fifth percentile estimate, which takes into account some
risk. That estimate is a lot higher.
I am recommending that we should be pricing at whatever the social cost of
carbon is for Canada. If the estimate changes, then the price should go higher.
Another consideration, of course, is essentially the economic cost to Canada
of a high carbon price — $150 or $200 a tonne — and whether the targets we have
should be met domestically or whether we should also be searching for global
options for, say, purchasing offsets, which would help us to meet our targets of
reducing a certain quantity of emissions but that do not necessarily have the
same economic cost in Canada.
Senator Massicotte: And you're saying at $50 a tonne, there's a $3.50
cost per barrel, which means how much filling up the gas tank? What is that per
Ms. Winter: I don't have that off the top of my head, but I can get
that information to you. My sense is that it is not very significant relative to
other gas taxes that are in place, such as the GST.
Senator Black: Dr. Winter, thanks very much for being available. I can
tell you, your presentation was excellent, and you have further underlined the
reputation of the School of Public Policy, certainly in my view, at least, so
thanks for that.
I want to talk with you about flexibility. You made the point, as I
understood it, that Canada needs to be flexible in respect of its emission
targets. Do you believe that the current position that Canada has set forward is
flexible? If not, what should be done?
Ms. Winter: In some senses, Canada's current position is flexible in
that the federal government has committed to working with provinces to develop
carbon pricing equivalency agreements. On the other hand, we have these firm
targets, and a lot of focus is on carbon pricing.
We're also not necessarily exploring the relative costs and benefits of
different policy options. This is where there's a lot of scope for work in the
academic community to help inform the deliberations of the Government of Canada
and your committee to evaluate whether we are approaching the problem in the
correct way: whether carbon pricing is sufficient or if we need to explore
additional regulatory policies to reduce emissions, such as the fugitive
emissions for the oil and gas sector, if we need to explore carbon capture and
sequestration in agriculture or if we want to explore offsets globally.
Senator Black: Those are processes and steps, many of which we're
hearing about, that will assist us to meet the goals that Canada has set arising
from Paris. In your conversation — and we've heard much of this testimony now —
you alluded to the potential cost to the Canadian economy being such that
flexibility may require something greater than just finding other methods to try
to meet these goals. Can you comment on that, the damage to the economy?
Ms. Winter: The issue right now is the social cost of carbon, which is
the cost to Canada of not reducing our emissions, is much less than the
estimated required price to meet our commitments. In that, there's a fundamental
disassociation between the policy goal, which is at least reducing global
emissions and meeting the 2 Celsius goal, and what the actual estimated cost to
Canada of emissions is.
That gap is why there is scope for flexibility. It means we have to consider
complementary policies to mitigate or reduce the impacts on the Canadian
economy. For example, Alberta has the output subsidies. That keeps the incentive
of carbon pricing without imposing the entire full cost of carbon pricing on
these energy-intensive sectors.
Senator Black: But isn't that just a shuffle of money? I take money
from you for carbon tax and because you're hurt I'm going to send some money
back to you to compensate. Don't you find that a funny way to do business?
Ms. Winter: It's a choice to be made whether you want to mitigate
these effects on a certain sector of the economy. B.C. went the route of
corporate income tax reduction, so that is beneficial for the entire B.C.
economy but doesn't address the competitiveness impacts on a single sector. It's
a choice in terms of what to do with revenue and what to do with complementary
Senator Black: Thanks, Dr. Winter.
Senator Mockler: Dr. Winter, in your 2013 paper entitled The
Importance of Policy Neutrality for Lowering Greenhouse Gas Emissions, you
discussed various policy solutions for lowering GHGs. The paper also suggested
that a flat tax on energy is the best option. I have multiple questions, but can
you expand on that? How will Canadian households and businesses be affected?
Ms. Winter: Absolutely. In that paper, we treated energy as equivalent
to emissions, so that was a theoretical abstraction, but for the majority of
Canada's greenhouse gas emissions, it comes from energy use. We were comfortable
with that assumption.
Now, we're saying that the flat tax on energy is the best because it means
that everyone faces the same price relative to other policy options, such as an
emissions intensity standard, for example. That creates differences in the
prices across sectors of the economy and across firms.
Now, in terms of the impact on households associated with a carbon tax, for
Alberta in particular — and I can get the calculations interest for the rest of
Canada — it's going to cost about $500 in additional expenditure. That generally
seems like a large amount, but in terms of a share of total expenditure by
households in Alberta, it's actually quite small, less than 1 per cent.
Senator Mockler: I have a comment and then another question. I
believe, doctor, you just mentioned you could provide us with additional
information on the impact. I certainly would appreciate that, especially in an
area that we're faced with right now, which is the aging population. Rather than
growing our population in Eastern Canada, we have the opposite. So if you have
time, I would like you to provide us with that.
My next question is in relation to our neighbours to the south. As a
professor, there's no doubt that you would have an opinion. Do you believe that
Canadian governments must adjust their emission reduction goals in light of the
new administration in the U.S.? Should Canadian energy and climate change
policies align with those of the United States as we talk going forward?
Ms. Winter: That is really one of the questions of the day regarding
how Canada should react to the new administration in the south. To answer your
question, part of it is that Canada faces different costs and benefits
associated with climate change. The reason I say costs and benefits is that
there is potential for some benefits to Canada as a northern country and global
warming would increase the growing season, for example.
Now, there are also significant costs associated with climate change. As I
stated earlier, we should be aligning our pricing policies, and other policies,
to match what the cost is to Canada. The scope for adjusting to what the rest of
the world does is, I believe, through complementary policies, if we're concerned
about competitiveness, if we're concerned about impacts on households.
Senator Galvez: Thank you very much. I definitely agree with your
statement that one tonne is one tonne, for sure.
I want to understand your statement that a $50 per tonne carbon tax is not
exceptionally burdensome on the oil and gas sector. Then you illustrated with an
example, ending with the perspective that the National Energy Board estimates
the cost of no additional pipelines at $10 per barrel. The costs of carbon tax
are swamped by the benefit of additional transportation infrastructure. Can you
please elaborate on this statement for me?
Ms. Winter: Absolutely. So the $3.25 is based on the average for the
oil sands. Of course, the cost to any given producer in the oil sands will
depend on their emissions intensity. So for very good facilities in the oil
sands, where they do not have much greenhouse gas emissions per barrel, the
costs will be much lower. For high emissions intensity facilities in the oil
sands, the cost will be much higher, so there is definitely variation.
Regarding the benefits of additional transportation infrastructure, that is
an estimate from the National Energy Board's Canada's Energy Future
report, where they have a no additional infrastructure case and an additional
infrastructure case. You can compare the benefit of oil production in those two
cases and the amount of production to get an estimate of what the cost per
barrel is of having no additional infrastructure.
The additional infrastructure enables the oil sands and other producers to
access more markets, which increases the price that they have available to them,
so that's the benefit of the additional infrastructure. It also potentially
results in lower cost of transportation because the pipeline is then the route
of transportation rather than rail, which would be more expensive than
Senator Meredith: Thank you, professor, for your comprehensive
presentation and a shout-out to the University of Calgary. A colleague of mine
is in Qatar and the flag is flying high there. I appreciate the work the
university is doing in terms of your work as well.
One of the critical things that I've always been concerned about is whether
the government is doing what they need to do. In the absence of full regulatory
framework across provinces, we know that the oil and gas sector is very
important to the Canadian economy. You talk about leakage, but what should we be
doing from a regulatory standpoint at this stage with respect to the emissions
targets that we've set? Are we doing everything we need to do? What can we do?
What are the top three things the Canadian government should be focusing on from
a regulatory framework to ensure uniformity across Canada?
Ms. Winter: You've raised an excellent point in that there are costs
of policies not being harmonized across Canada and across provinces. We've seen
this in trade costs, and the Ecofiscal Commission has also estimated the costs
of not having the same policies in different provinces with regard to carbon
pricing, because that increases the compliance costs for firms that operate in
multiple jurisdictions across Canada.
For the Government of Canada, one of the top things I would recommend is,
through the Canadian Energy Strategy or the Canadian climate change strategy, to
work to harmonize policies where possible. This can be in environmental
standards and it could also be in other areas. It doesn't necessarily have to be
environmental standards. It could be on fuel standards across provinces, things
like that. Where possible, creating rules that are similar, and that reduces the
economic burden on firms and can also help them meet the environmental goals
that we have.
Senator Meredith: Chair, I have a quick one with respect to industry.
Professor, the other aspect of this is the responsibility of the emitters.
Can you elaborate for me in terms of just what their part should be from the
social licence perspective, and their acceptance of what they are doing in terms
of how they are contributing to this reduction of GHGs? What should their
responsibility be, and have we done everything we can to ensure that those
emitters are really being brought to the table in a fulsome way?
Ms. Winter: The responsibility of the emitters is to respond to the
policies we have in place, and if it's carbon pricing it's to reduce emissions
in response to that or to invest in technology. One of the challenges right now
is that the prices in Canada are different depending on what jurisdiction they
are in. So there is the potential role for the federal government — like in the
U.K. — where we have a lower price in Ontario and Quebec, with the cap-and-trade
system, to have an additional federal carbon tax on that, to add to the cost to
ensure that firms in Ontario and Quebec operating under the cap-and-trade system
are facing the same incentive as firms in Alberta and B.C. that have the carbon
Senator Meredith: Thank you.
Senator Wetston: Thank you very much, Professor Winter.
Congratulations to the School of Public Policy. I suspect you have worked
closely with Jack Mintz over the years, and I suspect he still has some
relationship with the university. I really want to compliment the work you are
I have a general question that I think is a good question for a professor in
relation to your paragraph on the policy options we have available, which are
pricing, regulations and a combination of both.
You use language which I have a lot of trouble with, but I have had to deal
with it my entire professional career, and that's tradeoffs, costs and benefits,
winners and losers and political consequences. I'm sure, as an academic, you
have problems with that, as well.
I happen to be a bit of a fan of Arthur Okun, the macro-economist who
unfortunately passed away many years ago, and his approach to equality and
efficiency in the markets.
My question is: Is there any way, in your view and in your work, that you are
able to find a way to align? Not find winners and losers in the scenario that
you are presenting, but to align the interests of winners and losers that would
benefit Canada and Canadian society as a whole, whether you think about it from
a social utility or an economic efficiency perspective.
My question is about alignment: Where is the alignment that may be available
to you to create something nationally beneficial to the country as a whole?
Ms. Winter: That is a very good question, and it is a tricky
situation. The equality considerations versus the efficiency considerations are,
I think, one of the top issues for politicians to address in that we know, with
efficiency, they're arguing for everyone being treated the same. The equity
considerations mean that some groups, say energy intensive industries or
lower-income households, are more detrimentally affected.
I'm arguing that's the role for complementary policies in that if we scale
back on the level of the carbon price, whatever it is and whether it's a tax or
a cap-and-trade system, that means we're essentially lessening the stick, or the
incentive to change behaviour. By trying to address our equity considerations as
well as our environmental goals with the same policy instrument, we risk
undermining both in that we're still detrimentally affecting some parts of the
economy more than others, and the incentive to reduce emissions isn't as strong.
That's why I'm arguing for setting the price at whatever we think the cost is
for Canada, and then have complementary policies each aimed at a specific issue
to address that specific issue.
In terms of the alignment of interests, one of the tidbits that the oil sands
discusses is that they create steam by burning natural gas, so for them it makes
sense to reduce emissions because that means they are lowering their costs and
improving their ability to produce oil.
Another alignment of interests is that Alberta is accommodating
co-generation, where industrial facilities like the oil sands are burning
natural gas to create steam to produce oil, and a side benefit is they are also
generating electricity. That's a way where we have relatively less
emissions-intensive electricity generation and we're also able to produce oil.
Finding those synergies is one way to get alignment on winners and losers.
Senator Wetston: Thank you very much.
Senator Griffin: Thank you.
My questions are related to energy literacy. Do you believe the public has a
sense of the scope of the challenge that's going to be involved in meeting the
carbon reduction targets?
Ms. Winter: No, I do not. I also think that, in many ways, the public
is — and I include myself in the public — woefully uninformed about the scope of
the challenge, and it is very difficult to become an expert or knowledgeable in
any given issue.
One of the potential solutions that has been offered for transitioning Canada
to a low-carbon future is electrification of transportation. Yes, that is
possible and we could do it very quickly, or we could do it slowly, but there
will be a cost associated with that transition in that all transportation
infrastructure is essentially built around fossil fuel vehicles. Transitioning
to having a sufficient number of charging stations, building up the electric
grid and building up the number of generators to meet that expected demand will
have a cost, as well as decommissioning of the infrastructure that we have.
I think, right now, there has not necessarily been enough research into what
the potential costs of the different options are and what the potential benefits
are. I think one of the reasons there has not been enough research right now is
that even academics like myself haven't — until, say, the last 10 years — quite
grasped the scope of the challenge and what needs to be done.
Senator Griffin: My follow-up to that is still related to energy
literacy. I'm thinking that the public should know more about the issue, they
should be more literate about energy and carbon reduction targets, some of the
options to get there and, as you say, some of the costs. How do you think we
could do this?
Ms. Winter: That's a great question as well in that I find it very
interesting and I find environmental policy very interesting, but it is, for a
lot of people, very boring.
Just as an anecdote, I spent Christmas dinner explaining to my parents how
Alberta's carbon tax would work. That was a good, I don't know, two hours
explaining how Alberta's carbon tax works and how the rebate to households
works. My parents are very smart people but it still was not easy to understand
and so I think, where possible, academics like myself should be out speaking to
reporters explaining what's going on and providing accessible lay- language
explanations of the policies and consequences. I think that's a role for the
Government of Canada as well, as a public information campaign to not only
explain that we're trying to meet these targets and it's going to be good for
Canada, but what we are doing and why we are doing it.
Senator Massicotte: You make reference to all these policy options
being good for a country, and every country is sovereign. But with economic
policies, many of our companies and participants in the marketplace are
international. Therefore, you acknowledge the issue where we could be causing
exporters, particularly those that are intensive in emissions, to be
uncompetitive. You give two examples to remedy that. We can treat them
differently by returning some of the money back or protect them like they do in
B.C., excluding them from the application of that policy.
That would be good economic theory, but would you agree that to be fair to
those companies, we would also have to tax those importers who have a different
GES treatment — an import tax, effectively, for those companies — to ensure you
maintain a level playing field? Is that agreeable to you?
Ms. Winter: Yes, that is a potential solution and I'm not a trade
expert or a trade lawyer so I can't comment on the legality of something like
that, which would be a consideration. But yes, to level the playing field, in
terms of taxing imports based on their emissions intensity, it could potentially
work. But with a tax on imports, it will affect Canadian consumers. It will not
necessarily affect the companies that are exporting into Canada, and so it is an
option to protect Canadian producers by making their costs internal in Canada,
the same as firms that are external to Canada but that will be borne by Canadian
Senator Massicotte: I agree, and I appreciate that's a negative to the
consumer but do you have any choice? You seem to be saying that given the
negative we shouldn't be doing it, which means in time, the importer of goods to
Canada would dominate the Canadian marketplace. Their cost base would be
significantly less than our Canadian companies and isn't that a serious negative
to the Canadian economy if you allowed that to occur?
Ms. Winter: It could be a bad thing for the Canadian economy, but it
could also be a good thing for the Canadian economy. I'm sorry for giving the
typical economist answer.
At the end of the day, the majority of the carbon tax costs or carbon pricing
costs are going to be borne by Canadian consumers because they are the end
demanders of the goods. A fairness consideration could be to have an import tax,
I think, though, that in terms of what Canada could potentially do in
addition to that is encourage other countries to adopt carbon pricing so that
there are not necessarily these competitiveness concerns in Canada, that all
firms around the world are facing the same price. And then we can transition
away from complementary policies to address competitiveness concerns.
I realize that's a very idealistic answer, but given that many countries have
committed to emissions reduction targets and if thinking about benefits for the
global community is reducing emissions at the lowest cost possible, that will
mean carbon pricing.
The Chair: Ms. Winter that brings us to the end of questions, but I
have a couple of questions to ask because there is a bit of time left.
Earlier, Senator Massicotte asked you what it would cost at the pumps for
about $150 a tonne. If I extrapolate from British Columbia, it's about 7 cents a
litre for $30 a tonne, so it's probably about 35 cents a litre.
When we look at the targets that Canada has set for 2030 — you are well aware
of them and so are we — and we use the numbers from Environment Canada, we have
to reduce to meet the target. We should reduce by 219 million tonnes.
If you shut down the oil and gas industry, you could accomplish 233. That's
just 14 million tonnes over what we're supposed to reach. When you look at that
Herculean task and say, "is that possible,'' you have to think to yourself — at
least I do — that I don't think it is possible. I'm not saying that we
shouldn't; I don't want you to put me in the wrong pigeonhole. I don't mean we
shouldn't look at everything we can do, but when we set targets like this and we
don't tell the public about what it will cost them and how they have to change
their lifestyle, I think it's pretty unfair.
Do you think at $50 a tonne by 2030 that we can actually reach the target of
a 219 million tonne reduction in the whole world?
Just so you know, we've been told from other experts that that will take $200
to $300 a tonne. Would you tell me if you think we can meet that target? Targets
are great, but if you are not going to meet it there is no sense of putting one
Ms. Winter: Absolutely. You have raised a very good point in that the
strength of the stick, the carbon tax, will definitely affect how people behave.
So based on even $50 a tonne, it's unlikely that it will be sufficient to change
behaviour enough to meet Canada's emissions targets.
Now in terms of shutting down the oil and gas sector, the question is if we
did that, yes, it would reduce emissions from the oil and gas sector. But would
it make a difference? Essentially, it's probably not that big of a difference
because it will mean that Canadian consumers are just importing fuel, gasoline
and diesel from elsewhere. So that's a consideration and it's why I was
stressing the idea of flexibility in that we can put policies in place to
address what the cost to Canada is. And then if we have the goal of meeting a
target and we know it's going to be extremely costly domestically in Canada, we
should consider where else in the world we should work to reduce emissions that
are potentially extremely low cost.
I don't know what all of the options are, but there are ongoing forest fires
or piles of tires that have been on fire and potentially just putting out those
fires would be extremely beneficial in terms of global emissions and not cost
that much. These are flexible options that Canada should be considering.
The Chair: Thank you very much for that. It's a little hard for us to
control what happens around the rest of the world when we can hardly get it in
place in Canada. I appreciate that.
I have talked about this before and this is the second time I've heard any
presenter talk about adaptation, and you mentioned it right at the start. When I
look at the task ahead and I get information from around the world through our
Library of Parliament analysts, we know that emissions are going to increase for
at least the next 50 years because we are going to continue to use fossil fuels.
At least that's what is told to us right now by all the experts.
At least in my mind, when you think about all of those things, for instance,
that 2,000 coal plants in the next 10 or 15 years, some of them are being built
now. So all the things we do, and it's all the same air we breathe — it's the
same atmosphere — we're really losing ground, but we haven't looked at
adaptation to what will actually happen. Whether or not we like it, at least
with all the projections we have and all of those things, I'm not saying we
shouldn't look at reducing our carbon footprint, but we are still going to face
I'd like to know a little more about what you think about adaptation. I think
we should be looking Canada-wide more. How do we adapt to a changing world for
Fred and Martha — the average people. Who will pay the bill? If we just charge
them for carbon tax, they will not be happy. That's the end user; that's the one
who gets it. It's not so much the oil company but the end user.
Should we be looking more to adaptation, how we adapt to what is going to
happen to us, regardless of whether or not we hit the 219 tonnes? Because after
that, the government has said the next stretch is something that I think is
almost impossible. It's tighter yet. Could you give me your viewpoints on
Ms. Winter: Smart policy would be not just a focus on reducing
emissions but to look forward 10, 15, 20 and 30 years to adaptation in terms of
how climate change will affect Canada and whether we need to, say, invest in new
infrastructure in order to adapt to whatever the changes are.
Yes, the policy focus should not just be on avoiding emissions. It should be
on adaptation. That is a role for the government to help universities and firms
invest in research and development to try and adapt to whatever happens. Of
course, the challenge is that we don't know with any certainty what is going to
happen, so it's incumbent upon us to plan for a variety of future scenarios.
The Chair: Okay. Thank you for that presentation. It was very
interesting. We had some good questions and great answers. Thank you for taking
time out of your busy schedule to come and talk with us this morning.